The Federal Reserve's Balance Sheet: An Update

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Fri, 10/09/2009 - 10:32 | 94063 lizzy36
lizzy36's picture

Executive Summary: yadda, yadda, yadda.

Fri, 10/09/2009 - 10:37 | 94073 deadhead
deadhead's picture

I didn't read the report. I don't need to.  I already have an idea of what is on the balance sheet and some suspicions about what is on the balance sheet but cannot be proven unless the Fed has a thorough audit.

That said, my conclusion is that like geithner, paulson, the cheat street gang, I will believe Bernanke the day that I see wild hungry hyenas nursing an injured 3 legged baby zebra back to health.

 

Fri, 10/09/2009 - 10:42 | 94076 AN0NYM0US
AN0NYM0US's picture

If you have not viewed Bloomberg TV recently their Mid Morning broadcast has been re Vamped - the bad news is Kathleen Hayes (Liesman's sibling? Kneales's twin?) has her own show at 1pm (except today she is interviewing Ron Paul which should be bizarre)

Bloomberg Television
Fri, 10/09/2009 - 10:42 | 94082 buzzsaw99
buzzsaw99's picture

Good thing I'm a speed reader, sheesh! The zero percent lower bound is a misnomer as the fed is paying interest on borrowed reserves to the gangstas.

Fri, 10/09/2009 - 10:47 | 94087 Ducky
Ducky's picture

By quickly taking a lot of the credit onto the balance sheet the fed was hoping it would avoid a Japan-like outcome.

When we keep hearing about bad real estate loans being rolled over in pure hope of better of a brighter future it seems more and more like we are, at best, headed for that outcome.

So when Dick Bove keeps coming out and upgrading banks I keeping wishing they would have Soros there to ask him why he believes these banks are solvent.

Fri, 10/09/2009 - 10:49 | 94089 Stevm30
Stevm30's picture

Oh yeah the credit markets, THEY are where the disfunction lies...

Fri, 10/09/2009 - 10:52 | 94092 MsCreant
MsCreant's picture

Exit Strategy:

*Find non-extradition country

*Set up accounts in non-extradition country

*Buy Gold and Platinum

*Pack

  • Ben Bikini
  • Jeans
  • Binki
  • Flip flops
  • 7 teeshirts
  • Black book
  • 7 Undies
  • 7 pair Socks
  • Running shoes (wear a pair also)
  • Gucci loafers
  • DOP kit

*Shave head and beard

*Get tattoos and piercings

*Create alternative identity passports

*Haul ass

Fri, 10/09/2009 - 10:58 | 94100 Daedal
Daedal's picture

Shave head? Correction: Buy rug.

Fri, 10/09/2009 - 10:53 | 94094 Anonymous
Anonymous's picture

Adjusted monetary base has just hit all time high of $1884 Billion this week

Fri, 10/09/2009 - 10:57 | 94099 Stevm30
Stevm30's picture

I also loved how during his Q&A NOBODY asked him to comment about the lawsuit from Bloomberg and/or why he's not willing to open the FED's books to the public.  Our media: true public servants.

Fri, 10/09/2009 - 10:59 | 94101 Miles Kendig
Miles Kendig's picture

To those who postulate that ZH fails to provide space to various points of view I ask, is this posting:

A, One more ZH conspiracy theory.

B. One more foul use of the equal time doctrine.

C. One more central bank conspiracy theory.

D. A fair and balanced presentation of the activities of the US central bank.

E. A quality representation of the new spirit transparency in government promised by the administration.

Cheers.

Fri, 10/09/2009 - 11:06 | 94111 Ducky
Ducky's picture

D

Fri, 10/09/2009 - 11:01 | 94105 Anonymous
Anonymous's picture

Why even look? The Fed balance sheet is filled with "values" for utterly toxic assets, which can't be marked to market.

These books are as cooked as they possibly can be.

FNM and FRE bonds? LOL? The only thing that's truly remarkable at this time is that Bernanke has apparently bamboozled the other foreign central banks. If they only knew that it was only hot air behind our currency... because if they did they'd be unwinding as fast as they possibly could. There is no way -- no possible way -- the dollar survives this. History is chock full of similar situations. They all ended badly. Every last one.

Fri, 10/09/2009 - 12:57 | 94155 Anonymous
Anonymous's picture

"If they only knew that it was only hot air behind our currency... because if they did they'd be unwinding as fast as they possibly could."

they do know. they can't unwind quickly because that would mean the end of them as well.

but unwinding they are, believe it.

Fri, 10/09/2009 - 11:04 | 94110 Anonymous
Anonymous's picture

By the way, for those unaccustomed to reading Fed balance sheets -- the number that should be jumping of the page is: GSE-related securities: $824 (vs. $0 in 2007)

Not only is this a historically unprecedented development, but it is outright illegal under the Federal Reserve Act.

(See market-ticker.org if you need more info on this subject.)

Fri, 10/09/2009 - 14:32 | 94278 Anonymous
Anonymous's picture

Since Fannie and Freddie were taken into conservatorship by FHFA, does that mean the USG has guaranteed those bonds and that is why the Fed thinks it can buy the bonds?

Fri, 10/09/2009 - 14:33 | 94280 Anonymous
Anonymous's picture

Since Fannie and Freddie were taken into conservatorship by the FHFA, does that mean the USG has guaranteed these bonds?

Fri, 10/09/2009 - 11:06 | 94112 digalert
digalert's picture

Was it "responsible" or reckless abandon?

Fri, 10/09/2009 - 11:06 | 94113 Anonymous
Anonymous's picture

they aren't worried about the exit strategy because they know damn well that their actions will not lead to a stable economy

Fri, 10/09/2009 - 11:15 | 94119 Anonymous
Anonymous's picture

The level of disaster the US is to face depends mostly on whether one of the couple of remaining strengths shows up very soon, which seems highly unlikely at this point, or definitely vanishes.... I am referring to the existence of checks and balances.

Fri, 10/09/2009 - 11:15 | 94120 Anonymous
Anonymous's picture

The level of disaster the US is to face depends mostly on whether one of the couple of remaining strengths shows up very soon, which seems highly unlikely at this point, or definitely vanishes.... I am referring to the existence of checks and balances.

Fri, 10/09/2009 - 11:17 | 94122 rhinotrader
rhinotrader's picture

Why bother reading this? They only give you what they want you to see. The perception there selling, is reality in market. We won't know the vicarius position that we were/are in until 10 years from now. The Gov't is much, much more powerful than I ever thought. Has anyone ever seen the market so manipulated for this long? 1 day to a 1 month maybe, but 6 months? A 50-70% rally? Getting to the point that maybe this type of Socialism works better then Capitalism for the markets. Is there anything that can bring this market down?

Fri, 10/09/2009 - 11:28 | 94132 Anonymous
Anonymous's picture

Yes. There are several issues that can, and actually are going to, stop what is going on. Problem is, whether I think it is going to be between today and 2 years from now... it could take even longer... which means that from investing/trading purposes the certainty that what is going on is to be stopped... is kinda useless...

Fri, 10/09/2009 - 14:21 | 94264 Assetman
Assetman's picture

Why bother reading this?  Because it represents the Fed's poor attempts at transparency and accountability.

After reading this, one should ask: "If you were to mark to market the Fed's purchased assets today, what would they be worth?"

It's really simple accounting.  The liabilities that the Fed has ballooned in the form of reserves are highly likely worth much more than the assets they purchased-- and still continue to purchase. 

The reality is that the Fed is in an "insolvent" situation, the same way member banks are "insolvent".  In both cases, both entities remain solvent only bacause assets are not being market to market.  And there seems to be no hurry in doing so...

TALF is a sham, despite the Fed claming "minimal credit risk" because the Treasury has promised to "provide cover" for collateral that is actually "bad" when it "seemed good" when the Fed made its loans.

The Fed is also claiming "minimal credit risk" on its Agency and MBS purchases-- even though the assets are likely worth much less that what was paid for them.  At some point, the Fed will need to sell those assets-- and some entity supported by the taxpayer will need to step up and "provide cover" for these as well.  The Fed shouldn't be buying MBS at all.

This is precisely why the Fed needs to audited-- and soon.  While the Fed provides "information" here, we don't know the value of the toxic crap the Fed just bought-- nor do we know the prospects or the degree of payback on these assets. 

Sadly, the press doesn't appear smart enough to simply ask Uncle Ben if the market value of the assets on his bloated balance sheet are worth more than the liabilities assumed.   The (indirect and likely inaccurate) answer from our Chairman would no doubt make his voice quiver.

Fri, 10/09/2009 - 11:19 | 94126 kevinearick
kevinearick's picture

to be fair:

 

increasing pressure, decreasing volume.

we call that a ....

 

watch tax receipts.

Fri, 10/09/2009 - 11:26 | 94130 bugs_
bugs_'s picture

Note to self: Get bigger helicopter.

Fri, 10/09/2009 - 11:27 | 94131 Anonymous
Anonymous's picture

Does anybody know the web addrees for WEEKLY Fed money supply data (or may be titled monetary base) - the actual numbers going back a while, not a chart.

It was on this site months ago, but can't find the link anymore.

Fri, 10/09/2009 - 13:53 | 94216 Anonymous
Fri, 10/09/2009 - 14:35 | 94283 Anonymous
Fri, 10/09/2009 - 12:57 | 94154 andrew123
andrew123's picture

Does the holiday on Monday mean that the usual source of liquidity won't be pumping ?

Fri, 10/09/2009 - 13:24 | 94182 jm
jm's picture

The Treasury market has had enough of this shit.  

Fri, 10/09/2009 - 14:13 | 94245 Gilgamesh
Gilgamesh's picture

Debt ceiling?  What debt ceiling?  Let's crank these puppies out doubletime while we can still get away with it.  Pay no attention to yesterday's results.  Besides, bond selloff is bullish for the US!

Fri, 10/09/2009 - 13:29 | 94187 Prophet of Wise
Fri, 10/09/2009 - 13:33 | 94192 JR
JR's picture

As Gordon_Gekko says in comments to his blockbuster Gold and Economic Freedom: Did Greenspan Know What He Was Doing?,He [Greenspan] gave the bankers what they wanted…only too much of it!”  And Bernanke goes even further. Loyal servants both, but of whom?  Here is a revealing excerpt from “Greenspan's Grand Design To Serve the Money Trust - Financial Tsunami Part III”  by F_William Engdahl (2008) regarding The Long-Term Greenspan Agenda:

The stage was now set for the next phase in the Rockefeller financial deregulation agenda. It was to come in the form of a revolution in the very nature of what would be considered money—the Greenspan “New Finance” Revolution…through extraordinary feats of financial crisis management…the securitization revolution, the creation of a world of New Finance where risk would be detached from banks and spread across the globe to the point no one could identify where real risk lay…

Maestro serves the Money Trust

Alan Greenspan, as every Chairman of the Board of Governors of the Federal Reserve System, was a carefully-picked institutionally loyal servant of the actual owners of the Federal Reserve: the network of private banks, insurance companies, investment banks which created the Fed…

Greenspan's entire tenure as Fed chairman was dedicated to advancing the interests of American world financial domination in a nation whose national economic base was largely destroyed in the years following 1971.

Greenspan knew who buttered his bread and loyally served what the US Congress in 1913 termed “the Money Trust,” a cabal of financial leaders abusing their public trust to consolidate control over many industries.

Interestingly, many of the financial actors behind the 1913 creation of the Federal Reserve are pivotal in today's securitization revolution including Citibank, and J.P. Morgan. Both have share ownership of the key New York Federal Reserve Bank, the heart of the system.

Another little-known shareholder of the New York Fed is the Depository Trust Company (DTC), the largest central securities depository in the world. Based in New York , the DTC custodies more than 2.5 million US and non-US equity, corporate, and municipal debt securities issues from over 100 countries, valued at over $36 trillion. It and its affiliates handle over $1.5 quadrillion of securities transactions a year. That's not bad for a company that most people never heard of. The Depository Trust Company has a sole monopoly on such business in the USA . They simply bought up all other contenders. It suggests part of the reason New York was able for so long to dominate global financial markets, long after the American economy had become largely a hollowed-out “post-industrial” wasteland.

…[I]n reality there is a common thread running through each major financial crisis of his {Greenspan’s] 18 plus years as Fed chairman. He managed to use each successive financial crisis in his eighteen years as head of the world's most powerful financial institution to advance and consolidate the influence of US-centered finance over the global economy, almost always to the severe detriment of the economy and broad general welfare of the population.

In each case, be it the October 1987 stock crash, the 1997 Asia Crisis, the 1998 Russian state default and ensuing collapse of LTCM, to the refusal to make technical changes in Fed-controlled stock margin requirements to cool the dot.com stock bubble, to his encouragement of ARM variable rate mortgages (when he knew rates were at the bottom), Greenspan used the successive crises, most of which his widely-read commentaries and rate policies had spawned in the first place, to advance an agenda of globalization of risk and liberalization of market regulations to allow unhindered operation of the major financial institutions.

The Rolling Crises Game

…Unanswered at this juncture is whether Greenspan's securitization revolution was a “bridge too far,” spelling the end of the dollar and of dollar financial institutions' global dominance for decades or more to come… (end excerpt)

Other subheads: The 1987 Greenspan Paradigm, Destroying Glass-Steagall restrictions, Operation Rollback, ‘…strategies unimaginable a decade ago…,'** Greenspan's dot.com bubble and its consequences, The incredible March 2000 speech, Stocks on margin: Regulation T, On the margin.

** “The New York Times quoted Goldman Sachs chairman Lloyd Blankfein (in a June 2007 profile of Goldman Sachs, just weeks prior to the eruption of the sub-prime crisis)  on the new financial securitization, hedge fund and derivatives world: ‘We've come full circle, because this is exactly what the Rothschilds or J. P. Morgan, the bankers were doing in their heyday. What caused an aberration was the Glass-Steagall Act.’

Blankfein as most of Wall Street bankers and financial insiders saw the New Deal as an aberration, openly calling for return to the days of J. P. Morgan and other tycoons of the ‘Gilded Age' of abuses in the 1920's. Glass-Steagall, Blankfein's "aberration" was finally eliminated because of Bill Clinton.”

http://www.marketoracle.co.uk/Article3463.html

 

Fri, 10/09/2009 - 13:36 | 94195 chumbawamba
chumbawamba's picture

Keep adding to that balance sheet:

Coming Soon: $500 for Every Newborn?

http://finance.yahoo.com/news/Coming-Soon-500-for-Every-usnews-321798635...

I am Chumbawamba.

Fri, 10/09/2009 - 13:43 | 94206 chumbawamba
chumbawamba's picture

And then give yourselves extra time off for a job well done!

House cuts workweek to 2 1/2 days

http://rawstory.com/2009/10/house-cuts-workweek-to-2-12-days/

Fri, 10/09/2009 - 13:39 | 94199 Prophet of Wise
Prophet of Wise's picture

Bill Clinton, Phillip Graham, Robert Rubin and John McCain.

Fri, 10/09/2009 - 14:15 | 94253 Anonymous
Anonymous's picture

My favorite part:

"From a credit perspective, these emergency loans [to JPM and AIG] obviously carry more risk than traditional provisions of central bank liquidity. Two observations on this point are worth making: First, these loans amount to less than five percent of the Federal Reserve's balance sheet. Thus, Federal Reserve loans that are collateralized by riskier securities are quite small compared with our holdings of assets with little or no credit risk."

Yes, these "riskier securities" might be a small percentage of total assets, but the stated value ($101B) is double the Federal Reserve's $50B solvency margin (what was referred to as "capital"). Given that many of these loans are non-recourse, have questionable prospects of repayment and that loss severities in other credit-related instruments (CRE loans, ABS, AAA-rated CDO) are frequently in the 20% to 50%+, I have to think the Fed is or very close to being balance sheet insolvent. I am not sure it matters b/c it will always have sufficient liquidity, but it's a pretty scary thought all the same . . . .

Fri, 10/09/2009 - 14:45 | 94304 Anonymous
Anonymous's picture

Everyone else needs a balance sheet; we use a pivot sheet:)

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