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In One Day, Federal Reserve Posts $8 Billion In Unrealized Capital Losses (And Possibly Double That)
Today we get a brief glimpse of what will happen to the Fed's balance sheet when rates surge. In the span of one day, the Fed took an $8 billion unrealized loss on its $1.07 trillion in Bonds, TIPS and Agencies. It also likely experienced a comparable loss on its MBS portfolio. It's a good thing the Fed has $57 billion in capital accounts. Which means 4 days like today, and all of the Fed's equity buffer is wiped out. What happens next is up to congress.
The question that Zero Hedge has long been posing, namely why the Fed, which is now the world's biggest and most leveraged hedge fund (well second most, after the ECB) has no interest rate hedges on its books whatsoever, remains as valid today as ever. And with it being in print, Ben Bernanke will not have the fallback option of saying nobody had ever suggested the idea...
h/t John Lohman
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If you can make the rules / laws up as you go along .......why worry ? Simply bake another cake for the sheep to consume, NO ?..........more champagne and truffles please, thank you!
By definition, they can't hedge.
By the way , the cheese is wonderful !
"The question that Zero Hedge has long been posing, namely why the Fed, which is now the world's biggest and most leveraged hedge fund (well second most, after the ECB) has no interest rate hedges on its books whatsoever"
Hedges? Hedges? I don't need no hedges. I don't need no stinkin' hedges!!!!!!!!
Who on earth would take the other side of an interest rate hedge with the Fed? Only a true moron would be a counter-party in a trade where the other side could fuck you whenever they liked by manipulating interest rates to put their hedge in the money. Also, no counter-party has the capital to hedge $2 trillion net.
Spain, Portugal, Cali, Illinois, Belgium, and now US all seeing big moves upward in their interest rates. Wonder how much longer Japan can maintain and internally fund that crazy 1.25% rate? Likely that as rate spreads widen, this will put additional pull on money from Japan's citizens...and all it takes to swamp Japan is 2% rates. Soooo much debt and so little breathing room. Seems they are all moving from a jog to a brisk trot toward the debt default finish line...who will be first? U - S - A, U - S - A!!! All the way baby!!!!
Oh, I forgot Ireland, Hungary, Italy, New York, and likely plenty more in the race. Only can be one winner and it's likely already Iceland, followed by Greece buuuut I think they'll all get finishers medals.
Give Moody's a call or S&P as I am sure they'd give them an honest rating What ever the FED lost is what the PD pocketed. Again. This crap is just to recap the big banks without Congressional approval. It is what it is till the revolt
This crap is just to recap the big banks without Congressional approval.
And when the Fed starts to print money to cover these losses?
(the only remaining option other than bankruptcy - yeah right)
The bernank is a pants peeing loser...
didn't we all know that in 2008?
I was certain that the Fed would try to hide/cover up/ lie about its losses. I was also pretty sure team Durden would be on this like stink on a monkey. Nicely done.
What a loser this idiot Bernanke is. Rates going
straight UP in a Depression.
Isn't the notion that the Fed can lose money rather silly? They can always create more capital whenever they want.
Not quite. As long as they can expand their balance sheet, the losses will be easier to hide or delay. Government accounting is a set of lies agreed upon.
In any case, losses eventually show up as reductions in cash flow. At that point, the results are realized, and are obvious to anyone who cares to look. A good analogy is social security, which is now going into sharply negative cash flow.
+1
Brazen...
This is the main news article on the Daily Telegraph's website:-
"Britain's 38 million savers were urged to invest their money in the stock market after being warned that for many of them it was now a "waste of time" putting their cash into a savings account."
http://www.telegraph.co.uk/finance/personalfinance/investing/8202251/Investors-told-forget-savings-accounts-think-of-shares.html
The British CPI was indeed the most important piece of news today - along with Europeans bonds and 10YR US getting dumped -.
The article of the Telegraph just shows history is repeating itself. Hyperinflation will be a reality soon.
When the sheeple are being herded to market you know its lambs to the slaughter; this must be the herald of the next market collapse.
Cocksucker.
does ron paul have a hot tub?
When you can print money and buy more of the same asset class at lower prices, you can never truly go bankrupt.
Their loss is our gain. I hope!
Why do the "unrealized losses" on the Fed's "balance sheet" even matter? This is partly the reason they exist, to "absorb" these losses from the financial system.
It does, of course, all segue into sovereign default, or a monetary crisis, but then we already knew that.
http://strikelawyer.wordpress.com/2010/12/08/money/
http://strikelawyer.wordpress.com/2010/12/11/money-ii/
I should add that this gives the lie to their recent pronouncements that they "made money" on all their crisis loans.
No "paper" for me. Think I'll continue to add to and keep my stash buried.
Spend that monie while you got it Blackhawk. Ron Paul is watching for your ass.
I was wondering if they can even hedge this portfolio. I mean who takes the other side of that trade? They think they have better information on the direction of interest rates than the FED? They haven't hedged it because Bernanke is 100% sure he knows the direction of rates and the value of the portfolio. But since no one knows what is on the books, we can't really talk about Fed insolvency, right? And if they really were insolvent, would anyone ever find out? Does that make the US insolvent?
dead head fed goonzi's are just a handle on the financial toilet bowl of the world waiting for the unseen hand to flush in a foul smellin swoop!! Strong dollar!! Strong smellin!! Whole financial systems wreaks with stench & a pea soup purgin to spin demonic global heads of state!!!!
Like I said before:
YIELDS DON'T MATTER.
What is your problem?
If you’re tired of being robbed by Bankster’s and Politicians that line their pockets at the expense of the PEOPLE, then watch the YouTube video “Join the WAVE” at (http://www.youtube.com/watch?v=6HMnI8X6rvk).
Fight tyranny and help the movement to go viral!! It’s time to take OUR COUNTRY BACK!!
by Anonymous
Inspiring. It is true that a class losing it's wealth due to fraud, it is wise for them to stand up when you still? have the ability to, before the strife.
Time to crash the stock market and get those yields down before the FED goes bankrupt.
Question: The Fed is a private entity, owned by the banks. What if they disclaim the interest on the Treasury bonds they're purchasing? Today they return all profits from seignorage to the taxpayer. How would this be different?
If the Fed goes broke as rates go higher, we can just print our own fiat currrency and give it to them. Then make another backed by the gold and issued by a National Bank. Our army, not theirs.
From HP"Kansas City Federal Reserve Bank President Thomas Hoenig again expressed concerns that the program could destabilize the economy, the Fed's statement showed. He has dissented at every Fed policy meeting this year"
Thomas has seen his past errors with the fed he now see's clearly
Amazing Grace, how sweet the sound,
That saved a wretch like me.
I once was lost but now am found,
Was blind, but now I see.
The rest of the FED is still on the slave boat, still making errors, creating the problems that will create the final crisis of confidence.
Does this mean anything?
Traditionally (when laws are enforced, that is, unlike nowadays) banks fail when they become insolvent. They can't really go "bankrupt."
The Fed can't become insolvent, can it? What are they paying out? I guess maybe a few salaries and some trivial operating expenses, but compared to the interest, that should be about nothing.
Am I missing something? If so, it must be pretty damn major.
A paper loss isn't a loss until you realize it! C'mon Tyler everyone knows that!!!