A Wall of Money
The early 2000s were a nervous, quarrelsome, time—terrorism, airport check-in lines, a discouraging war, energy disruption, nasty politics. But to be a banker, or a high-rolling investor, was very heaven.
When the dot-com boom imploded in late 2000, the Fed responded by cutting the federal funds rate from 6.5 percent to 3.5 percent within the space of just a few months. In the aftermath of the tragic events of September 11, 2001, the Fed continued to lower rates—all the way down to 1 percent by 2003, the lowest rate in a half-century. The Fed did not start raising rates again until mid-2004, and for thirty-one consecutive months, the base inflation-adjusted short-term interest rate was negative. For bankers, in other ...