The market is in chaos because of new policy decisions. Stocks have dropped sharply, trading on Wall Street has come to a standstill, and hedge funds are running for the exits. Businesses are finding it difficult to borrow capital. Many people are starting to worry about the safety of U.S. government bonds. At this moment, everyone is turning back to the old question again: When will the Fed intervene?

Looking at history, the Fed only truly intervenes when the market is “starved of capital”—that is, when no one dares to trade anymore. Former Fed official David Wilcox once said it plainly: “A blockage in capital flows is the clearest sign.” If capital is blocked, the Fed is forced to step in. If capital is blocked and the economy falls into recession as well, then the Fed has no choice.

But the current situation is more complicated. The labor market is still strong, inflation has not eased, and PCE is still at 2.8%. If the Fed cuts interest rates now, prices could rise again because of the new policies. In addition, if the Fed injects money or coordinates with other countries, the administration could face sharp criticism.

Looking back, there have been 5 times when the Fed had to step in because the market was under too much strain. In 1998, the hedge fund Long-Term Capital Management collapsed after the Asian and Russian crises. Investors fled, the market became clogged, and interbank interest rates surged. The New York Fed had to mount a rescue at the end of September; after that, the Fed cut interest rates 2 times in October.

In 2001, the tech bubble burst, followed by the September 11 attacks. The tech market collapsed, and U.S. bonds were also hit. The Fed cut interest rates urgently in January 2001. When 9 months after the 11/9 event arrived, trading came to a complete standstill. The Fed had to pump in a massive amount of money—on September 12 alone, banks borrowed 46 billion USD from the Fed, whereas normally it was only 1 billion USD.

The 2007-2008 financial crisis is another lesson. Subprime mortgage bonds fell in value, and stocks collapsed. The Fed lowered interest rates to pump money into the system. When Lehman went bankrupt in September 2008, the Fed cut interest rates to 0% and rolled out a series of bailout packages.

The Covid-19 pandemic in 2020 was another shock, different in nature. Hedge funds ran for the exits, and bonds and corporate debt wobbled. Investors withdrew billions of dollars, and companies hoarded cash. The Fed cut interest rates to 0% and bought 1,600 billion USD worth of bonds in a matter of weeks. In 2 years, the Fed’s balance sheet grew from more than 4,000 billion to nearly 9,000 billion USD.

Most recently, in 2023, there was a crisis at regional banks in the U.S. Before Silicon Valley Bank collapsed, people had already withdrawn money in large numbers. Interest rates rose rapidly from 2022, leaving banks holding losses they had not sold. Depositors moved their funds into higher-yield money market funds. The Fed rolled out a lending program; more than 1,600 institutions borrowed, and the situation eased.

And now, in 2026, the question is back again: How long will this shock last? Will the Fed step in, or will it leave the market to fend for itself? No one has a definite answer, but history shows that when the market is truly “starved of capital,” the Fed will have to act. The question is whether we can recognize the signs of that when they appear.