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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.
- Securities
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. - Net
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. - Float,
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.
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Alright! Alright! I admit it! I bought the damn things! Somebody told me gold was in a bubble and I guess maybe I panicked. Those securities aren't that bad are they?
Yes, they are real bad. 50% of them are in foreclosure already and the owners have stripped them and graffitied the walls with "fuck the man" and "Bernake suck me". I will this one time buy them from you for 2 pennies on the dollar but just promise me you will never trust the Fed again.
Okay. Here's your 2 pennies.
"This was mostly due to an even more incredible reduction in MBS of $2.8 billion."
It could be MBS amortization,especially in fast-pay structures. Mortgage rates at record low, there must be a lot of refinancing (prepayments) going on.
that's what i think, see my post below, combined with no new deliveries due to the holiday. just means we will see a big spike sometime soon.
Well, I'll gladly pay you Tuesday for an MBS today.
Could be. But has anyone checked Ebay? It's the only thing that the Fed hasn't tried yet.
Who would be stupid enough to by those MBS?!? I can only fathom a guess and say BOE... I would rate them as the 2nd dumbest and 2nd most corrupt central bank, behind the Fed of course. Is King giving Zimbabwe Ben a little sweet lovin to try to see him through the confirmation?
These numbers make me want an audit so bad I can taste it!
Anybody know what Gideon Gono is up to these days? I wonder if we could see him step up as Fed Chairman if Uncle Ben has problems.
Can someone explain why England still exists? What do they export beside soccer hooligans?
Their imperialsim - we bought into it's spirit the last 40 years
Their healthcare - we are currently buying into
Their MONETARY system - bought into 1913
It's hard for them to be 2nd most corrupt, when for the most part the same people control both.
Queen of England
Queen of Netherlands
Rothschild's
I think you put the cart before the horse.
It's them running the Fed, not the other way around.
A couple things:
Their purchase activity has been running around 16B a week. But those are forward committments, they don't take delivery right away (which is why you see gross and net numbers - sometimes they "sell" MBS, but they are not really selling MBS bonds, they are rolling forward commitments, or cancelling forward committments - check next week, there will be a big difference between the gross and net numbers as they roll some of their committments forward).
What seems to be on the balance sheet are MBS that they take delivery of.
That's why you sometimes see big jumps in MBS on the balance sheet, far beyond what they committed to buy for the week - deliveries all come in at once.
As for the decline this week, not sure. They aren't selling any as far as I know. 2.8B is a pretty small number, could be due to amortization/prepays. They have about a $1T book today, at a normal runoff rate, 150-200B a year would amortize/prepay, or 2.8 - 3.8B a week. Could be what's happening, combined with no deliveries last week (which would make sense given the holiday - a lot of poolers would have taken the week off).
All that really means is there will be a catch-up one of these weeks, since they are still buying at a 16B/week clip.
http://www.newyorkfed.org/markets/mbs/
a couple of things;
this article on the world's tallest building
http://www.france24.com/en/node/4939937
and the comment from the hearings today where Bernanke/the Senator agreed that the March deadline for the MBS program was firm in the same way the troop withdrawl from Afghanistan in 18 months is firm
check this out, this deserves its own post. "Chief criminals" Right on Li Wei. Don't pay the bastards.
http://www.ft.com/cms/s/0/9d3ce434-e029-11de-8494-00144feab49a.html
A senior Chinese official who oversees the country’s largest state-owned enterprises has publicly slammed western investment banks for “maliciously” peddling complicated derivative products that caused huge losses for Chinese companies over the last year.
In Beijing’s strongest criticism on the matter to date, Li Wei, vice director of the State-owned Assets Supervision and Administration Commission, singled out Goldman Sachs, Morgan Stanley, Merrill Lynch and Citigroup in a long and highly critical article in the latest issue of an official Communist party newspaper.
The large losses suffered by Chinese state companies were “closely associated with the intentionally complex and highly leveraged products that were fraudulently peddled by international investment banks with evil intentions,” Mr Li asserted. “To a certain extent some international investment banks were the chief criminals and the root of ruin for the Chinese enterprises who encountered this financial derivatives Waterloo.”
You think maybe if Blankfein invites him to Goldman Sach's big Christmas bash...
Maybe the indictment and prosecution of these criminals won't come via the Dept of Justice but though indictment, rendition/extradition and conviction in the Chinese courts...now that would be Justice..."
Maybe the tranch went to zero and they wrote it off...
Ding Ding - we have the winner!
That's what I was thinking also.
Maybe they decided to do an actual mark-to-market value.
Could someone please check to see if the mandate given to the fed allows them to purchase $1.25T, or to hold $1.25T? I wonder if this isn't planned out to give a never ending QE.
The borrowers in the Fed's old-school (2008 vintage) 5.5% MBS are refi-ing and creating a whole bunch of new, shiny 4.5% bonds for the Fed to feast on.
Not to worry; according to note 3, the pipeline is overflowing:
"Commitments to buy mortgage-backed securities: 162,380
Current face value. Generally settle within 180 days and include commitments associated with outright transactions as well as dollar rolls."
Accounting. Things can move and disappear through amortization or, as the gov't has shown repeatedly, outright misrepresentation.
No one bought them. But part of the message is to make y'all believe someone did.
Why did they have to be bought?
Maybe they were just marked down to zero.
It is an Fed asset graph, after all....it can go down
to zero without anyone buying anything.
good article on ron paul.
http://www.independent.co.uk/news/world/americas/ron-paul-every-man-for-...
g-face - you contibute some good stuff - ZH should take you on as an official contributor
Someone please explain to me why putting the feds in my bedroom and criminalizing abortion, which Paul adamantly advocates, is a "libertarian" position?
Ron Paul essentially advocates giving jurisdiction of the abortion matter to the States, thereby keeping the Feds out of it. I'll admit that it is one of his quirks that seemingly is in conflict with the Libertarian view of personal freedom. But, in giving the man his due, as a doctor he has delivered over 4,000 babies. That, no doubt, has shaped his philosophy. I personally do not have a dog in the fight.
More info here: http://www.ontheissues.org/TX/Ron_Paul_Abortion.htm
Do Libertarians feel it is a freedom to commit murder? Do Libertarians accept that there is no legal protection for a human being prior to birth? I think this is just as open an issue for a Libertarian as it is for a communist.
You could be right. I am far from a studied Libertarian, although I do have many similar view points. I am just not informed enough to answer your question (rhetorical I assume).
I was about to browse this entry.... join me. Perhaps you'll find some answers.
http://en.wikipedia.org/wiki/Libertarianism
Well at what point is it murder of a human being or the destruction of a zygote? I for one agree 100% with almost everything Ron Paul says, he certainly made me rethink a lot of conservative view points that I used to disagree with because he has sound logic (vs almost every other republican I have heard).
He actually stated something along the lines that life begins at conception, which is a fact, but he forgets life is not being human. The process of development that eventually becomes a human child is very blurry from start to finish of what is the human that falls under the protection of the law, and which is not human and doesn't.
I for one believe hands down if it can survive out side the womb its human, I would even say pretty much after it has all its major organs its human. But I think you need some wiggle room to allow for abortion. Just my 2 cents.
there are over 7 billion human beings on the planet, and rising. nobody, not the church, not the government not you ,have the right to prevent a woman from terminating a pregnancy, if she has decided, that it is her best option...having a kid is not a one off event, its a long term commitment. that next child may diminish the viability, of a whole family. no abortions, but the gov can send soldiers to die in a sensless war, no problem, they're not babies anymore, and hell they get a free gun to protect themselves.
I think he's more of a jeffersonian democrat and a constitutionalist than a libertarian.
And I can be ok with that. states that want intrusive government, either economically or socially can have it. And I can move to the states that don't.
And California goes bankrupt and the south ends up with more babies than they know what to do with. We find out which policies work and which ones don't.
I'd go ya one further and suggest that all matters should be left to the community/municipality/city leaders whose laws are locally passed. Yes, we'd end up with some pretty extreme enclaves, but isn't that what we started with? Isn't that why the Continent was settled in the first place? As you suggest, each area could be a petri dish of a law's efficacy. Least of all would I advocate having the Fed's in the bedroom as rubberduckie opined
It's what the 10th Amendment was meant to accomplish, until the Feds and the Supreme Court decided the Commerce Clause allowed the central government to control everything.
Yeah. Thank goodness for United States v. Lopez which set some limits.
Criminalizing abortion is a libertarian position largely to the extent that you consider unborn children to be human beings.
There is a logical fallacy somewhere in your statement -- but my Latin is a little rusty.
Perhaps a begging of the question?
Since this is an economics board, does anyone remember that before Roe vs. Wade there used to be a thriving business transporting women to other jurisdictions for abortion services? One outfit in my home town offered limo pickup at your door, air tickets, limo to your hotel and hospital in Santo Domingo, and return home as a package deal.
Unless you can get every country on the globe to join with you, criminalizing abortion only stops poor women from having one.
AUTARKY
re:Fed Balance Sheet Declines By $15 Billion
BAC needs cash, Now.
Maybe they were write-offs.
Floating 3.5B/month over 30 years? What's the problem?
The reduction is probably a function of repayments of the old loans in the MBS. We recently broke 5% on mortgages. This will trigger more refi activity. There is still a lot of people who can refi to lower rates.
A 6% mortgage should be repaid if it can be replaced with 5%. I think it is as easy as that.
If the Fed wanted to end the program (March) with the max in portfolio (1.25T) it would mean they would have buy about 1.4 T over the entire twelve month period. Nice trick Ben
Gold Likely To Correct In Price Because
Well the FED has tried to lie about ending quantative easing and it didn’t work to suppress the gold price [inflation trade]. They have a new [very old actually] gambit to fool the markets which will probably work in the very short term and get gold to correct down. How much who knows, but don’t sell unless you must or this may be your last real buying opportunity in the second leg of the gold bull.
I hate to post long post as most don’t ever read them, but this is important and I have seen no commentary which I can link to on this subject. So you will have to read my stuff until others catch on to their ploy. First read these links. The first explains repo’s and the second is a news story which tells about yesterday’s “First Test” of the FED’s new lie, and probably is the reason your are seeing a decline in the gold price.
Repurchase agreement - Wikipedia, the free encyclopedia
FT.com / US & Canada - 'Reverse repo' tool is tested live for first time
The headline from the news article proves that even these financial writers are newbies and may not understand what is going on with the FED. Repo’s have, in the past, been used by the FED all the time but in the last several years with massive money printing they have become rare, at least they are no longer reported in the media as they once were.
A RR [reverse repo] does indeed drain money from the banking system but the usual RR is usually an “overnight” adjustment made by the FED. These repo’s to be effective must have durations of much longer than just overnight. So you can count on these RR having much longer durations.
The question is: Is this the end of Quantative Easing? No way as these RR’s must eventually be ended as that is what they are, to be repurchased and ended. Now all sorts of mischief can be created and lies told with these RR’s. Technically the FED could RR its entire growth in its balance sheet, which would drain all the money out of the banks. This would of course cause interest rates to skyrocket so don’t think that they would try to go this far.
This is just another lie in a “brand-old suit.” As the security collateral never leaves the FED’s balance sheet in the first place they are not reducing Quantative Easing but merely adjusting the level somewhat.
In the olden days the FED used repo’s and reverse repo’s to fine tune the amount of funds which the banks had on hand. This “quaint” notion of fine tuning became absurd when they added $1.5 trillion to their balance sheet in just weeks so you haven’t heard much about repo’s recently.
The best analogy that I can think of for this FED action is this: The entire spillway of the Hoover Dam has been opened flooding the entire lower Colorado Basin and much of Los Angeles under mountains of worthless paper. The use of reverse repo’s in this ongoing operation is like using an “eye dropper” to adjust the flow.
This is yet another lie being told to the markets but this one will probably have a temporary psychological effect downward on the gold price [inflation trade]. But cheer up buck-o’s it will end soon and gold will march ever upward until it probably reaches infinity.
I have to agree with you reasoning but disagree with it working.
I too see the forces aligned on golds head. My guess is they will hammer it back down to maybe 1160 but likely only 1180 just because the fight at the 1168 line was fierce as could be and didn't last but about 3 days. They used to be able to fight for weeks at a time. Gold has become the proverbial cat out of the bag. it won't go back in without scratching you badly. The fed will soon be doing drastic things to "break the back" of events but will likely on result in a few tubes of ben gay and few tubs of icey hot being sold.
I didn't think that gold would prove me right so quickly as it is now down a bunch.
The phony unemployment stats somehow have exempted the rest of the inflation trade like oil, for now.
I bet that the rest of the inflation trade gets crushed TODAY, and since I am not long this stuff it doesn't effect me.
Look out below oil.
yeah I was thinking perhaps Reverse Repo as well.
Thing is that RR isn't a permanent drain on cash. When the Fed undoes the Repo, the counterparty gets more cash back than the cash they pledged. Should be inflationary.
Would not be surprised to see oil get pounded, but I'm staying long any core holdings like CANROYs.
1169 still doesn't want to give up the 1168 line. This shit will be 1300 in 2 weeks.
You can ban abortions all you want but unless you get rid of every coathanger in the US, you are still going to have them. The big difference is you'll have dead and infertile women as well as providing income for back street criminal abortionists too.
perhpas if contraception was made more freely available and you guys actually talked about sex like it was natural, that might help.
do we care about maimed drunk drivers?