"Other Fed Assets" Hits Record $133 Billion, More Than The GDP Of Kuwait

Tyler Durden's picture

That the Fed's balance has hit another record high (and will do so for at least two more weeks) should come as a surprise to nobody. After all, when something is at a record and grows relentlessly, it is pretty safe to say next week will be another record. That said, there were several curious observations in this week's H.4.1 update. First and foremost is that the "other Fed assets" category just hit an all time high of $132.7 billion. This category, which is now larger than the GDP of Kuwait, is apparently so comprehensible and transparent to the hoards of FOMC precleared journalists, that for the second meeting in a row, nobody feels like asking a question about just what is contained in this asset class. We also hope that nobody attempts a correlation between the Other Fed Assets class and the S&P. Another notable thing is that as we suggested back in January, the amount of MBS prepays continues to drop and has slowed down to a trickle. Elsewhere, the Fed's excess reserves are once again back to chasing Bernanke's expanding asset class, with over $40 billion more in cumulative asset expansion since the start of QE Lite, than excess reserves. Lastly, looking at the Fed's custodial treasury holdings, there was another small decline in USTs held in proxy by the Fed: the first decline in 4 weeks, since the May 25 second biggest historic drop, discussed previously on Zero Hedge. Aside from these, it was smooth sailing for the Fed, where the average maturity of SOMA holdings declined just modestly from 61.6 to 61.5 months.

Full balance sheet:

Other Fed Assets:

The ever declining amount of MBS prepays:

Cumulative change in Excess Reserves and total asset holdings since QE Lite:

And lastly Treasurys held in custody at the Fed:

And the maturity distribution of the SOMA holdings:

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Seasmoke's picture

what are they going to do with all those toxic mortgages (that no one is paying)

Ahmeexnal's picture

Tsunami about to make landfall on Alaska coast.

Maybe that's why the SPR were sold off.


Delmar's picture

Tsunami came to my mind when I saw the first chart too...

snowball777's picture

It's not funny, but I had to laugh.

snowball777's picture

warning sirens caused hundreds of people to begin climbing up a nearby hill.

Small mercies it was a place with a long history of tsunami that was as ready as you can be.

Squid-puppets a-go-go's picture

some first year cadet accidentally sat his fat ass down on the control panel and pressed the big red scary looking HAARP button

infiniti's picture

Toxic mortgages? There is no such thing. You either bought a shitty pool or a great one.

Only your analysis can be 'Toxic'.

snowball777's picture

what are they going to do with all those toxic mortgages (that no one is paying)

I can tell you what John Paulson would do, if that would help.

Libertarians for Prosperity's picture

The quantity of MBS and agency debt holdings at the Fed are actually declining.  

One must stand in awe of Bernanke's superior ability to manage his balance sheet properly without a disorderly and inflationary expansion of our currency.


The size of Bernanke's balance sheet is not nearly as problematic as all the carnival barkers want you to believe. Everyone has a tendency to believe that the $2.8T on the books is extra liquidity that needs to be mopped up - not true. Currency in circulation is the delineation of extra liquidity, or, said more fittingly, the difference between QE assets and QE debits diffused through the system. As depicted in the chart linked above, this difference has grown perfectly orderly, despite the colossal expansion of the Fed's books.  

In all honesty, it is downright stunning that Bernanke has been able to keep currency growth and subsequent inflationary pressures in check. Four years ago, had someone told you that the Fed would have $2.8T on the books, anyone would have assumed that our fiat society would have imploded while gold would rocket toward $5000/oz and oil to $200. If the events of the past four years can't sink the ship, I'm beginning to think nothing short of a nuclear war will.


Zero Govt's picture

Libertarian for Pros  "One must stand in awe of Bernanke's superior ability to manage his balance sheet properly" 

Yes most of us have to value assets at market value... Ben and international bankers can enter LaLa Land (or fraud for short) with theirs: "I see a toxic turd on my balance sheet, here watch me sugar coat it and shine it, look how yummy and glossy it is now!"... you can see the "superior ability" you mention when you're so inept being able to cook your own books like Ben & the Bankers you can make insolvent transform magically into solvent in the flick of an Auditors pen right?

...and let's hear it for the accountancy profession whose original remit was to provide clear transparent honest statements (for outside investors and shareholders) and have once again (Enron Mark.II) bent over like corrupt crones and turned balance sheets into opaque fraudulent pieces of garbage ...yet another worthless and corrupt Western profession/institution that does the exact opposite of its original purpose

mmlevine's picture

It used to be that I was proud to be a CPA - it felt like I was the first line of defense.

In my professional life, I have not given up.  My financials are pristine.  But the banks, the Fed and IBanks who now get away with marking to make believe are an embarrassment to the profession.


7againstThebes's picture

I don't know if you are right, Libertarian for Pros.

Don't forget the good old "V" in PQ=MV (price x quantity =money x velocity).Right now, the velocity of money is low.


But the money is now out there in the system, and it could begin circulating.



DollarDive's picture

Inflation is in check ?.... Really.  By what measure ?   Oil prices ?  Gold ? Gasoline @ $4.00/gallon.  How about the ever decreasing size cereal boxes.  The box is now the size of about two bowls of cereal.  This type of inflation has been passed through to the consumer and you know it.  You've been drinking the Kool-Aid too long.  You've become conditioned to high prices and you now believe that they're normal.  I remember $1.00 per gallon gasoline.....where's that gone ? 

If you really want to get the speculators out of the commodity markets - raise rates.  Get the dollar higher, and watch them run.  Its' a simple solution.  But there's got to be more pain....and nobody wants to face the music.  Cut the shit......raise interest rates now.  Most of our politicians don't  have the BALLS to do it.  They value their jobs.  Eventually we'll all get pissed when we're paying $8.00/gallon for gasoline.  Democracy my ASS.

Inflation is not in check at all.  When there's no demand its' called deflation.  If there was ever any real demand, then we'd be far worse. OK - so you think he's brilliant - I'll reserve judgement until the experiment has been fully completed and we can draw true conclusions about his "superior abilities" - not emotional responses to an incomplete puzzle.

Re-Discovery's picture

They are buying Euros

Cult_of_Reason's picture

"other Fed assets" = ES and SPY

Today's violent market reversal had a signature of a central bankster -- similar violent reversal pattern and price floor formation to force short covering that we often see when the central bankers conduct their currency manipulations.

Sancho Ponzi's picture

I'm with you, although Bennie wouldn't buy directly. That $100 billion is what the boyz owe Bennie for their Fed created credit lines used to purchase equities. 

Newsboy's picture

"Other Fed Assets" = Eurodebt poison the ECB swallowed, in trade for something more valuable?

faustian bargain's picture

I have the feeling that financial and economic journalists - the few that actually care about journalism - check ZH religiously to see what it is they should be reporting on.

Cognitive Dissonance's picture

It's probably the other way around. They check ZH to confirm what is verboten and not to be discussed when lobing softballs to the Chairsatan.

Even with all this preparation (H) the Chairsatan still only managed one hit among 45 minutes of strike-outs, whiffs, pop-ups and batters balks, a new batting error created by the Fed and acknowledged by MLB two months ago.

PulauHantu29's picture

Great article and charts...the Stealth QE3 under way, verdad?

buzzsaw99's picture

it's just bad investments that ran contrary to good bonuses for the hordes of bankster gangsters.

Zero Govt's picture

it's even more simple than that:

The Feds balance sheet is equal to the greed and stupidity of Wall Street and Washington

the massive expansion of the Feds balance sheet over the past 3 years can be directly correlated to these human characteristics running amock... shame on 'Benny the Crone' for feeding them

blindman's picture

"there is no success like failure and failure is
no success at all".. b.d.
that is the fiat race to the bottom in a nut shell.
the fed is the bad bank as the system needs the reserve
currency to be the weakest in the collective lunge to
extinction, fraud and larceny becoming prized traits
in the endeavor. the system depends on it, if the
euro doesn't remain strong compared to the dollar that
would destroy what is left of the american economy, yet
the euro is doomed, so the fed has to blow its own
brains out to save its assets. ( but that can't work ).
so we need someone to come up with a drug for the symptoms
of mental riga mortise. also, the europeans have a pass, because of this, to ff..up as much as they like and the fed will have to cover it. a get f..d up free pass from the fed.
it will be spun as the "government" and taxpayer must
pay the devil for inviting the beast vampire squid into
their domicile, so privatization will be called for, pennies
on the dollar, global electronic tolls on every
door. you asked for it
she said " you made yur bed, now lie in it, damn it anyhow."
ps. i really want to know exactly which deals / assets the fed
has been dealing in that are explicitly prohibited from its
charter. i know there are, must be, many but which ones, from
which entities and which deals?
Federal Reserve Act
Section 9A. Participation in Lotteries Prohibited
(a) A State member bank may not-- 1.deal in lottery tickets;
2.deal in bets used as a means or substitute for participation in a lottery;
3.announce, advertise, or publicize the existence of any lottery;
4.announce, advertise, or publicize the existence or identity of any participant or winner, as such, in a lottery.

Back To Top
(b) A State member bank may not permit-- 1.the use of any part of any of its banking offices by any person for any purpose forbidden to the bank under subsection (a), or
2.direct access by the public from any of its banking offices to any premises used by any person for any purpose forbidden to the bank under subsection (a).
bearing in mind that a cds could be considered as a bet or lottery related
type security if defined in context of a "credit event". ?

Yen Cross's picture

That first Fed Reserve chart, looks like an Effen. Subduction Zone!

Element's picture

With thrust faults and greenschists! ... and a ... volcano!

Yen Cross's picture

  Element~ you are a lot of fun.  Pretty darn smart as well!  



Element's picture

And it's going bigger.

Watch this video from June 7th this year; http://www.youtube.com/watch?v=o_unoB8xFxE&feature=related

1 out of 48 homes foreclosed in 3 months is the rate given in the small text for Phoenix in QTR1 2011. The US national average was given as 1 foreclosure in 119 houses, for the same QTR. This national average may not sound like much, but over 3-years that would equates to 1 in 9.92 houses in the USA would be foreclosed (i.e. 10%). So it's actually a spectacularly devastating rate of foreclosire to the communities, and to the REAL economy, sans stimulus, which the video points out failed to arrest the decline, and QE did nothing either (and I thought QE was done to pump-up asset prices? - FAIL!).

But it's unspeakably worse for a peak-rate area like Phoenix, where 1 in 48 per QTR equates to 1 in 4, or 25% of all homes in the city being foreclosed within 3 years. That rate of course fluctuates, but there's little that suggests within that video's points that the rate is going to decrease any time soon, nor falls in prices, and nor will the shadow inventory, or the foreclosures ... those that aren't even being processed or revealed ... or can't be processed. Indeed, the rates of foreclosure seem to be mostly accelerating.

What that indicates is things are EXTREMELY serious right now and is an actual community and national catastrophe if it keeps going like this (which seems to be the informed outlook). This will terminate thousands of banks (and should have already... but for the ad-hoc officially-condoned systemic accounting fraud, that pretends to be business as usual).

Other zh posters recently described the quantitative impacts of a 30-year loan and bundled interest plus asset price decline, processing costs, depreciation etc. Basically, the eventual loss on a foreclosure can be double the original price the house, leaving the bank deep in the red. So banks rely on foreclosures to remain low-rate rarified events over the first 15 to 20 years of the loan's duration, and for house prices to never NET drop nationally, by ~33%, in 4 years ... with much more to come.

But when it's 1 in 48 foreclosures per QTR (i.e. 1 in 12 per year), and it stays near this level for a protracted period, then the banks and the economy are beyond help. The banks go broke because their clients go broke. Their clients go broke because the drop in demand of a lack of investment means no NET profit from trade, thus no house repayment is possible, thus the bank can't operate their way out of the worsening feedback-loop.

In the same way, Greece can't ever work out of it's debt feedback-loop, that the ECB insists on making worse, thus assuring the ECB's own eventual inability to extract itself from the ever-worsening debt load. They think they can't go broke but they've already waded in too deep. Bernanke, Paulson, Geithner and Obama did the same dumb things. They bailed out the banks ... but it was their clients who were broke! Banks go broke because their clients go broke first. And it really doesn't help when the banks MADE their own clients go broke first, which we now know they definitely did do.

"Masters of the Universe"? ... or, ... "Dumbshit arse-clowns with ill-gotten bonuses"?

No economically viable customers = No banks

er, but we still must amend this idealism to approximate reality, thus;

No economically viable customers = No non-criminogenic banks

And that's what we really have now in these predatory-lending TBTFs. NONE of them should be "suffered to live". Interesting phrase that, as it implies we may chose to suffer in some form to allow someone undeserving to remain alive, or else, that their being permitted to remain alive will naturally lead to others suffering--or else, both.

Bush and then Obama and US chamber puppets of Govt all decided to suffer these wholly undeserving criminal predators to live, so they could and would create further harm and suffering to any remaining solvent clients. And to then even 'skull-fuck' those which they had already destroyed economically - and we know they did - and then awarded record bonuses.

And thus they simultaneously eliminated their purpose, and also their excuse for being "suffered to live", and anyone who materially aided and abetted them to degenerate this system into a 1 in 48 foreclosure rate per QTR likewise.

Can there be ANY more damning a rationale or motive for the people?

But there is!

Fraud-closure, on top of it all, is just the final deviate conspiracy that we know is an actual honest to goodness grand bankster conspiracy, carried out over at least two decades. And that demands that the current systemic of crony-crook'z'-that-be not be suffered to live.

For it's wholly due to them that the TBTF remain, and these remain the owners of the Fed, and owners of their pet political vermin.

TexDenim's picture

We shouldn't question Zimbabwe Ben! He knows more than we do!

Zero Govt's picture

Ben is carefully selected to know only one thing, how to follow his Masters in Washington and Wall Streets bidding

..judging by his many words he doesn't know much. And judging by his recent admissions regards not having a clue about the economy, unemployment, inflation and the non-recovery it's fair to say he knows jack shit

..which is a perfect CV for a Fed Chairman who merely sits behind a desk all day waiting for 'The Call' whenever his bankrupt Masters need him for yet another pile of cash. 'Benny the Slave' is thy name, all else is very elaborate window dressing

alpha60's picture

your chart claims that the Fed is holding 140 trillion usd of other assets.

Tyler Durden's picture

Hah. Give it 3 years. It will be spot on.

Missiondweller's picture

"We also hope that nobody attempts a correlation between the Other Fed Assets class and the S&P."

I think the fed's "other assets" increased at about 3pm on Thursday.


Sutton's picture

Is a short put position in this "Other Holding'/

John McCloy's picture

Amazing how it pulls a Superman in March 09.
What else happened in March 2009?
I believe that is when Pres. O in a private meeting with Ben gave him the go ahead to buy stocks.
Other assets is chock full of ES, inverse oil, gold and silver ETFs. The Fed is now the biggest hedge fund on Earth and they get to make profits manipulating the market.

Herbert_guthrie's picture

Never fear, no matter how bloated this balance sheet appears, obligations can be reduced by trading US gold held as collateral on debt to the FED.

Let's see, how much gold at 1930s prices do we have to surrender to make up a few trillion?

Libertarian777's picture

how long till PSA hits 0 on the MBS?



AldoHux_IV's picture

Can't wait til they go bankrupt.

electronpaul's picture

Time to elect a guy who wants to end the Fed. Go Ron Paul.