Fed Balance Sheet Declines By $15 Billion After Improbable Reduction In MBS, Excess Reserves, Monetary Base Hit Record
The Federal Reserve's balance sheet declined by $15 billion to $2,183 billion from the prior week, after the Fed presumably offloaded $2.7 billion in MBS: this is the first time since QE started that MBS holdings have declined. If anyone can tell us just who the idiots are who bought MBS from the Fed (and at what price), and who the even greater idiots are who are supposed to believe this, please send us an email.
held outright: $1,784 billion (an increase of $86 billion MoM,
resulting from $3 billion in new
Treasury purchases, $78 billion increase in MBS and $8 billion in
Agency Debt), or a very surprising decline of $1.3 billion sequentially. This was mostly due to an even more incredible reduction in MBS of $2.8 billion. Whoever is auditing the Fed's balance sheet: we suggest you take some accounting lessons from Arthur Anderson.
borrowings: $206 billion. Total excess reserves have hit a new record of $1.19 trillion: an increase of $80 billion weekly. Banks continue hoarding cash for that inevitable moment when the shit hits the fan.
liquidity swaps, Maiden Lane and other assets: $192
billion. CPFF was completely flat week over week. FX liquidity swaps declined once again and reached another 52 week low of $23.4 billion. Maiden Lane I
and Maiden Lane II (Bear bailout special) were at $26.4 and $15.8
billion, while Tim Geithner's Goldman rescue package better known as
Maiden Lane III came at $23.0 billion.
Foreign holdings increased by $6.2 billion to $2,932 billion.
As the chart below demonstrates, reserve balances with F.R. banks are now at a record $1.15 trillion, and while the monetary bases also hit a new record of $2.1 trillion, the currency in circulation barely increased by the laughable amount of $600 million. The ratio of currency in circulation to outstanding MBS and Agencies was at 91.5. This ratio first declined below 100% on October 21. It will continue declining in perpetuity as the Fed buys every mortgage ever issued by Fannie and Freddie, and those sold by Pimco as well.