"Other Assets" Of $210 Billion Is Now The Fed's Third Largest Asset

Tyler Durden's picture




 

Below is a list of the 4 largest Federal Reserve asset category by notional as of today:

  • Treasurys:  $1,655,889 million
  • Mortgages: $883,627 million
  • Other assets: $209,863 million
  • Agency debt: $79,283 million

Quietly, the Fed's Other Assets have overtaken Agencies, and are now the Fed's third largest asset category and about four times the total Fed capital of $55 billion. We have written about these "other assets" in the past; we will likely write about them in the future again, for the simple reason that the chart showing the Fed's notional holdings in this category correlates quite clearly with the parabolic Greek unemployment rate.

Finally, here is the semi-circular definition of Other Assets provided by the H.4.1:

Includes other assets denominated in foreign currencies, which are revalued daily at market exchange rates, and the fair value adjustment to credit extended by the FRBNY to eligible borrowers through the Term Asset-Backed Securities Loan Facility.                                                    

Who knew that in addition to being a master of borderline Congressional perjury, the Fed was so adept at tautology: other assets are, well, other assets.

But at least we know something about the subset of the set that contains the set as a subset of itself (Bertrand Russell's head just exploded): it contains "other assets denominated in foreign currencies."

Foreign currencies: this means foreign assets. Which perhaps answers a long-running question. Recall that in March we revealed that, based on the Fed's own admission, it was monetizing not only US debt, but foreign debt as well (much like what the BOJ is hoping to do as well in its imminent "forceful" easing).

  • *DUDLEY: FED HOLDS OVERSEAS SOVEREIGN DEBT TO MANAGE RESERVES

Wait, wait, it's in the Fed's charter to buy foreign bonds?

Yup. In the Chairman's own words:

Central banks typically hold a variety of assets, and the composition of assets on the cen- tral bank's balance sheet offers another potential lever for monetary policy. For example, the Federal Reserve participates in all segments of the Treasury market, with most of its current asset holdings of about $650 billion distributed among Treasury securities with ma- turities ranging from four weeks to 30 years. As an important participant in the Treasury market, the Federal Reserve might be able to influence term premiums, and thus overall yields, by shifting the composition of its holdings, say, from shorter- to longer-dated securities. In simple terms, if the liquidity or risk characteristics of securities differ, so that investors do not treat all securities as perfect substitutes, then changes in relative demands by a large purchaser have the potential to alter relative security prices. The same logic might lead the central bank to consider purchasing assets other than government securities, such as corporate bonds or stocks or foreign government bonds. (The Federal Reserve is currently authorized to purchase some foreign government bonds but not most private-sector assets, such as corporate bonds or stocks.)

One thing, however, that was unclear is where on its balance sheet the Fed was lumping these "overseas sovereign debt" purchases.

Now we know. And more importantly we know the maximum possible size (until such time as the Fed provides an actual break down of precisely what is in "other assets") of said foreign bond holdings: $209 billion and rising parabolically.

Perhaps, with Europe supposedly "stable" due to the recent stability of its sovereign bond markets, it is time to ask the Chairman just how responsible the Fed has been in the past several months for said stability, courtesy of expanding its own balance sheet, since the ECB continues to play coy with the Spanish PM, but where the completely unused OMT is supposed to provide some mystical backstop to everything.

Or, to cut to the chase, how many tens of billions of Spanish, Italian, French, Japanese and other sovereign bonds does the Fed currently hold?

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Thu, 12/06/2012 - 21:30 | 3041289 nmewn
nmewn's picture

Black Holes.

Thu, 12/06/2012 - 21:34 | 3041301 I think I need ...
I think I need to buy a gun's picture

DO OTHER ASSETS INCLUDE THE GLD?

Thu, 12/06/2012 - 21:36 | 3041309 kliguy38
kliguy38's picture

Try SnP contracts

Thu, 12/06/2012 - 21:43 | 3041322 SmallerGovNow2
SmallerGovNow2's picture

Millions?

  • Treasurys: $1,655,889 million
  • Mortgages: $883,627 million
  • Other assets: $209,863 million
  • Agency debt: $79,283 million
  • I think we are off a half dozen zeros....

    Thu, 12/06/2012 - 21:57 | 3041343 LetThemEatRand
    LetThemEatRand's picture

    Not sure what you mean that we are off six zeros.  The first number is 1.6 million million.  One million million = 1 trillion.  To accumulate one trillion dollars, you have to take one million millionaires, hire a few of them at Treasury, buy the President and Congress, and then steal the rest from the hundred million or so middle class.  Voila.  

    Thu, 12/06/2012 - 22:04 | 3041373 Big Slick
    Big Slick's picture

    "$209 billion and rising parabolically"

    That plot does not look parabolic.  I'd call it linear.  Mischaracterizations like that throw water on otherwise great analysis.


    Thu, 12/06/2012 - 22:09 | 3041391 LetThemEatRand
    LetThemEatRand's picture

    Take it back a few decades and it's parabolic.

    Thu, 12/06/2012 - 22:38 | 3041468 jomama
    jomama's picture

    haha, yeah, i wonder what that r^2 looks like.  sure as shit ain't anything close to 1.000

    Fri, 12/07/2012 - 01:10 | 3041737 Dingleberry
    Dingleberry's picture

    ok....instead of parabolic say the assets held went up 500% in a few years....notice the trend line?

    Fri, 12/07/2012 - 02:36 | 3041816 fourchan
    fourchan's picture

     

     

    •Treasurys: $1,655,889,000,000

    •Mortgages: $883,627,000,000

    •Other assets: $209,863,000,000

    •Agency debt: $79,283,000,000

     

    buy your ounces people. this creature is the bubble of all bubbles.

    Fri, 12/07/2012 - 08:52 | 3042067 DavidC
    DavidC's picture

    Bubble? I see no bubble...

    [\SARC]

    DavidC

    Thu, 12/06/2012 - 21:50 | 3041339 kliguy38
    kliguy38's picture

    scratch that ......try hookers and blow instead

    Thu, 12/06/2012 - 21:55 | 3041347 knukles
    knukles's picture

    swap lines, NO gold, S&P contracts, gold futures, puts, PIIGGY debt, miscellaneous unrated bad ass nte vaule zero horseshit

    what have I missed?

    Fri, 12/07/2012 - 02:28 | 3041811 fourchan
    fourchan's picture

    The fed is a bubble.

    Fri, 12/07/2012 - 02:48 | 3041829 prains
    prains's picture

    I think that is called a Fubble

    Thu, 12/06/2012 - 21:44 | 3041323 Glass Seagull
    Glass Seagull's picture

    Nah, Fed and BOE allowing us to do the heavy-lifting/GLD buying for them.  They get the benefit of swapping the gold out of the physical custodian stores though. 

    This is how the Fed and BOE are getting the physical gold back. 

    Fri, 12/07/2012 - 01:50 | 3041779 Daily Bail
    Daily Bail's picture

    For anyone who hasn't seen this.

    This is actually an excellent song, no joke.

    Fuck The Fed - A Central Bank Love Song
    Thu, 12/06/2012 - 21:30 | 3041290 ACP
    ACP's picture

    Charter, Constitution, whatever.

    Thu, 12/06/2012 - 21:32 | 3041297 AUD
    AUD's picture

    What constitutes Fed capital?

    Thu, 12/06/2012 - 21:56 | 3041350 stocktivity
    stocktivity's picture

    How did this fuck Bernanke get this kind of power?

    Thu, 12/06/2012 - 22:38 | 3041467 Real Estate Geek
    Real Estate Geek's picture

    Power is seized, not grannted.

    Sun Tzu, I believe

    Fri, 12/07/2012 - 08:53 | 3042069 DavidC
    DavidC's picture

    Obama returned it to him after Bush...

    DavidC

    Thu, 12/06/2012 - 22:00 | 3041358 knukles
    knukles's picture

    Lots and lots of imaginary electronic zeros, an old cigar box of razor stubble, 5 of Alexander Hamilton's toenail clippings, a small sack of Hitler's ashes, an autographed Linotype picture of Izaak Elchanan Rothschild and a cardboard box of tags illegally removed form pillows and seat cushions.

    Booyah motherfuckers

    Thu, 12/06/2012 - 22:03 | 3041371 HurricaneSeason
    HurricaneSeason's picture

    Bridges, swampland and baseball and pokemon cards. Hundreds each of Micky Mantle and Babe Ruth that are worth 10s of billions of dollars each to the right buyer.

    Thu, 12/06/2012 - 22:05 | 3041378 Whoa Dammit
    Whoa Dammit's picture

    "What constitutes Fed capital?"

    A nod or a wink to a blind horse.

    Thu, 12/06/2012 - 22:31 | 3041448 AUD
    AUD's picture

    If this is the case, then the Fed would have to be the most leveraged bank on earth. Total liabilities a couple of trillion, total assets a nod or a wink.

    So why accept its credit as if it were the ultimate extinguisher of debt? As if it were money?

    Thu, 12/06/2012 - 22:45 | 3041481 HurricaneSeason
    HurricaneSeason's picture

    "My fellow Americans, I'm pleased to tell you today that I've signed legislation that will outlaw Russia forever. We begin bombing in five minutes." Ronald Reagan-August 11 1984 

    The Bernank can do it too. Ask Saddam and Mommar that wanted to try something different.

    Fri, 12/07/2012 - 01:07 | 3041730 TheProphet
    TheProphet's picture

    Go back and read the Guggenhiem report Tyler posted herein a few months ago. The Fed IS far and away the most leveraged financial organization on the planet.

    Interest rates are not going to rise for at least 8 years, likely much longer.

    If the Fed accomplishes their goal of $4 trillion in monetization, the Fed balance sheet will be levered close to 100:1, and the average duration of securities on that balance sheet will be more than 10 years. At that point, quite literally a shift of a few basis points in interest rates would render the Fed insolvent from one moment to the next.

    Have a nice day!

    Fri, 12/07/2012 - 08:54 | 3042070 DavidC
    DavidC's picture

    And I'm guessing the Fed has its exit plan worked out.

    [\SARC]

    DavidC

    Thu, 12/06/2012 - 21:35 | 3041302 Water Is Wet
    Water Is Wet's picture
    Cop: And was there anything of value in the car?
    DUDE: Huh? Oh. Yeah. Tape deck. Couple of Creedence tapes. And there was a, uh. . . my briefcase.
    Cop: In the briefcase?
    DUDE: Papers. Just papers. You know, my papers. Business papers.

    I don't know why. That just seemed relevant.
    Thu, 12/06/2012 - 21:35 | 3041304 Debtless
    Debtless's picture

    Other assets like, um politicians?

    Fri, 12/07/2012 - 04:12 | 3041877 spdrdr
    spdrdr's picture

    When I was young and illiterate, I thought that "assets" were young, female donkeys....

     

    Thu, 12/06/2012 - 21:36 | 3041306 IndicaTive
    IndicaTive's picture

    There's gold in there somewhere.

    Thu, 12/06/2012 - 21:51 | 3041340 CH1
    CH1's picture

    Honestly, I think they'll eventually declare bankruptcy.

    Then they'll start over with a new fiat game. Different front companies/names, a worse structure, but a return to shearing the same stupid sheep.

    Thu, 12/06/2012 - 22:33 | 3041454 jomama
    jomama's picture

    the classic new american sham

    Fri, 12/07/2012 - 14:04 | 3043287 Kobe Beef
    Kobe Beef's picture

    Of course, there were two before the Fed. Where's Andrew Jackson when you need him?

    Thu, 12/06/2012 - 21:36 | 3041307 Its_the_economy...
    Its_the_economy_stupid's picture

    $209863 million?

     

    Thu, 12/06/2012 - 21:36 | 3041308 max2205
    max2205's picture

    A fucking lot!

    ECU china and USA each pointing guns at each others head while masterbaiting each other

    Thu, 12/06/2012 - 21:37 | 3041312 Darkness
    Darkness's picture

    Is parabolic your favorite word? There are some great synonyms for it out there, just a thought. 

    Thu, 12/06/2012 - 21:48 | 3041335 IndicaTive
    IndicaTive's picture

    Such as?

    Thu, 12/06/2012 - 22:01 | 3041364 knukles
    knukles's picture

    WOW!
    Holy Shit!
    Oh My God!
    You gotta be kidding me!

    Fri, 12/07/2012 - 00:14 | 3041669 Schmuck Raker
    Schmuck Raker's picture

    Indicative is right:

    Thesaurus Adj. 1. parabolic - resembling or expressed by parables
    parabolical   2. parabolic - having the form of a parabola
    parabolical rounded - curving and somewhat round in shape rather than jagged; "low rounded hills"; "rounded shoulders"
    But thanks for your negative contribution anyway. [Kudos, Knuckles. Don't forget "Holy Bejeebus", and "Fookin' 'Ell.]
    Thu, 12/06/2012 - 21:38 | 3041313 e-man
    e-man's picture

    Other Assets = whatever other crap C, GS, JPM, MS and BAC used as collateral to stay above water.

    Thu, 12/06/2012 - 21:40 | 3041314 Crtrvlt
    Crtrvlt's picture

    No doubt taken off the hands of foreign subsidiaries of us banks, some well connected hedgies and of course duetche bank all at par. Bank bailouts forever. But of course many of the people that work at these institutions consider themselves hard working free market pure capitalists who deserve every dollar they "earn"

    Thu, 12/06/2012 - 21:40 | 3041315 Vagabond
    Vagabond's picture

    They are collecting all sorts of worthless bonds for the great vaporization.

    Thu, 12/06/2012 - 22:07 | 3041383 HurricaneSeason
    HurricaneSeason's picture

    They started with about half a trillion before the great farce. I'm thinking they're goint to push away from the table before it hits ten trillion, maybe before 5 trillion. Someone might accuse them of cheating if the pot gets too high.

    Thu, 12/06/2012 - 21:39 | 3041317 Nid
    Nid's picture

    Which category records the Short VIX Futures?

    Thu, 12/06/2012 - 21:42 | 3041319 Its_the_economy...
    Its_the_economy_stupid's picture

    Economy or no economy, people still gotta hang a rat. Gotta get some t.p. somewhere.

    Thu, 12/06/2012 - 21:42 | 3041321 fonzannoon
    fonzannoon's picture

    Does it matter? They don't ever have to mark them to market right?

    A small part of me could see those other assets being Maple leafs, kruggerands and credit suisse bars. Then, when on the border of hyperinflation Bernak comes out with a pile of bullion and grabs his balls and yells "How you like me now!!!"  That would be something.

    Thu, 12/06/2012 - 22:40 | 3041473 BidnessMan
    BidnessMan's picture

    I really am Laughing Out Loud! You made my evening

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