Just to put this into perspective, immediately following the attacks of September.11th and during the lead up to the most expensive military campaign in American history (maybe even world history), in a press release dated September.17, 2001, the Fed described the emergency loans that they were forced to issue to banks in response to the attacks as “unusually large“.
Two years later in 2003, the fed’s balance sheet had ballooned by 18%, but this almost seems justified compared to what we are seeing today. At the time, America was involved in two large scale military campaigns in the Middle East — what they refer to as “The War on Terror” — and as we know, war is not cheap.
“While our financial system recovered very quickly, the effect on the economy has been longer-lasting.The attack shook an already weak economy.The Federal Open Market Committee (FOMC) responded decisively, cutting the target for the federal funds rate by 1.75 percentage points during the final four months of 2001.These actions built on earlier policy moves during 2001 in which the target fed funds rate was reduced by 3 percentage points. Overall, the FOMC reduced the target fed funds rate during 2001 from 6.5 percent to 1.75 percent—the lowest level in more than 40 years”. Chicago Fed, 2001
“On Wednesday, the Fed injects $38 billion, more than double the previous record.Thursday, the Fed shatters that mark with $70 billion.The next day, the Fed injects even more—$81 billion”
FRBC 2001 ANNUAL REPORT