Why Did The Fed Inject Banks With A Record Amount Of "Other" Cash In The Past Week?

Tyler Durden's picture

Update: as some claim, the "other" reserve move may have been sourced to satisfy GSE demands. That would be ideal and would indicate that FR banks are transferring excess reserves to fund GSEs consistently (and would also provide some curious accounting dynamics in the Fed's balance sheet). However, there is one small glitch. As a reminder, Fannie tapped the Treasury for $7.8 billion in Q3, while the quarterly Freddie Mac injection amounted to $6.0 billion. In other words the combined $13.8 billion cash draw need would almost explain the $88 billion weekly shift... if only it weren't for the other $74.2 billion. Furthermore, the balance is not explained by debt maturities or other transitory weekly cash needs. In fact, the YTD cumulative delta in the "Other" category is $115 billion, well above what the GSEs have publicly indicated they have received from the Treasury.

For all its obscurity, the Fed's balance sheet is relatively simple: on the right there are the liabilities such as currency in circulation (which is relatively flat at around $1.1 trillion but rising slowly (for now) every week), and excess reserves, at $1.5 trillion, or the money that is "parked" with banks and is the topic of so much consternation: will it ever spill out into the broader economy, won't it, and if not why not, and if yes, will it cause hyperinflation, and other such tangential ruminations. Then on the left we have the assets, or the "stuff" that backs the currency in circulation and excess reserves, such as Treasurys and MBS, which total $2.6 trillion, and which are the primary variable in every Large Scale Asset Purchase episode also known as Quantitative Easing: should the Fed "print", or said otherwise, "purchase" assets, then the excess reserve number goes up first, with a hope that it will slowly spill over into currency in circulation and other broader monetary aggregates. Lastly, there is also the Fed's capital account or "shareholder equity" for purists, but since the Fed can never in theory be undercapitalized by conventional definitions, this is merely a placeholder. Another broad way of looking at the Fed's assets is "factors that supply reserve funds" or "source of cash", and liabilities as "factors that absorb reserve funds" which is, logically, "use of cash." The key assets and liabilities noted above are the major components of the "flow" - they move glacially up and down, and are priced in well in advance of such moves. It is the marginal, or far small numbers that matter, and that fluctuate materially from week to week, that are not priced in, and are thus market moving. One such curious liability which we pointed out recently is the Fed's reverse repo agreements with foreign banks: in the week following the MF Global bankruptcy these soared to a record $124.5 billion. Basically, foreign banks scrambled to procure a record amount of US Dollars while repoing Treasurys and who knows what else with the Fed, an indication that other conventional liquidity conduits had frozen in the days following the Halloween MF massacre. Since then the Fed's Reverse Repo balance has moderated to more normal levels as Treasurys have gone out of repo with the Fed. Yet something more troubling has just been spotted. In today's one-day delayed issue of the Fed's H.4.1, literally the very last number on the very last subpage in the weekly update reveals something quite disturbing. Namely the Fed's "other" non-reserve based factors absorbing liquidity. And specifically, the actual number, which rose by an unprecedented $88 billion in one week to an all time high of $115 billion for the week ended November 23!

Why is this troubling? Because unlike reserves, this number is effectively not defined, and there is no clear transposition between assets and liabilities, not to mention that "other" could mean virtually anything. So in SOME ways this could simply be a plug to a plug (such as Fed Capital), and reading too much into it may simply be an exercise in futility.  On the other hand, what we do know, is that by the generic definition of factors absorbing liquidity, in the past week, a domestic financial institution (because unlike last time around, this was not a foreign-based need for cash) was the willing and ready recipient of an incremental $88 billion in "reserves" - read cold, hard cash. Because if it is a plug, what it is "plugging" is an $85 billion drop in F.R. bank reserves which declined from $1.575 trillion to $1.489 trillion, an $85 billion decline. Which leads us to the question: is the "Other" deposit merely a slush fund to convert "on the books" reserves into an "other" use of proceeds. In other words, the question is - just what event is it that caused the rotation of $85 billion in reserves into $88 billion in "other" liquidity absorbing factor, and what do Economics textbooks teach about massive swings in "Other" F.R. deposits? What - Nothing?

We wonder: in this day and age of trillions in fungible excess reserves, and discount window stigmata, just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?

Exhibit 1 and only:

Source: bottom right

And for those curious what comprises the "Miscellaneous Deposits" category which may or may not comprise the full "other" subcategory, we refer to the Financial Accounting Manual For Federal Reserve Banks, section 11.30 (220-400):

A wide range of miscellaneous deposit accounts are carried on the books of the Reserve Banks. The deposits arise from depositary responsibilities assigned to the Reserve Banks by law—such as accounts opened by the Federal Deposit Insurance Corporation to cover closed banks and checking accounts opened by government agencies. Deposits also arise from work in process at the Reserve Banks, such as payments received from employee subscriptions to savings bonds, funds received for the account of new depository institutions which have not as yet opened for business, and interest paid on securities held pending redemption in federal estate tax cases. Deposit accounts are also carried for purposes that are peculiar to only one or a few Reserve Banks. The Board of Governors, for example, maintains a general fund account at the Richmond Reserve Bank to cover general disbursements and another to cover payroll charges and the Federal Reserve Employee Benefits Office maintains accounts with the New York Reserve Bank. The individual accounts and balances comprising this account should be detailed on the Reverse of the form 34. The individual account descriptions should be adequate to identify the different types of accounts maintained under this heading. For example, "Employee subscriptions to savings bonds" is a sufficient description, rather than Miscellaneous Deposit account 1, etc.

Somehow, we don't quite understand how the above explains an $88 billion swing in one week.

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fonzanoon's picture

Okay what was it?

AbelCatalyst's picture

Looks like ZH just found the missing MF Global funds.... Go Tyler!! You da' man! Now, if you could only find the Madoff $ !!

paarsons's picture

The banks are toast.

They are sitting on so many piles of dog-shit that there ain't enough money in the world to save them.

Gotta let 'em fail.  Then re-structure.

http://fucklloydblankfein.blogspot.com

SGS's picture

"just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?"

Assuming you are being 100% rhetorical. 

nope-1004's picture

just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?

 

Insolvency!  Always has been, always will be.

Good bye BAC.

 

Help Is Not Coming's picture

just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?

The banks have got to top off the tanks prior to the new "stress tests".


a noun a mouse's picture

From unkle Ben... stress test reports are due in December 15th. But from section 1.2, the banksters are also supposed to report "Trading and counterparty positions should be based on balances as of the close of business,
November 17, 2011." So is it too late to top off?

http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20111122d1.pdf

 

Doña K's picture

How about sovereign European debt?

Cover the banks before Monday?

 

TuesdayBen's picture

Nice work. But note that it says 'should', not 'shall' or 'must'.

Oh regional Indian's picture

Should, could, can, can't, won't..... I think these are words from the kitty of a person with a thinking brain.

Not psycopaths. A spycopath is really like that crazy animal, someone shareda video some time ago... Banker Psycopaths are like the NAstyass Honey Badger.

http://www.youtube.com/watch?feature=player_embedded&v=4r7wHMg5Yjg

What they want, they take. 

Now the next link is to my work on you tube...not quite as fierce as the honeybadger:

http://aadivaahan.wordpress.com/2011/11/23/aadividya-second-trailer/

ORI

 

boattrash's picture

just what was it that caused the junkie to stick the needle in his arm?

Popo's picture

"just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?"

 

Bonus season?

Big Slick's picture

I understand... In DEATH, a column on the Fed Balance Sheet HAS a name.  This column's name is SHADOW US-BANK BAILOUT.

achmachat's picture

i thought it was robert paulson...

LongBallsShortBrains's picture

This column's name is SHADOW US-BANK BAILOUT.

h3m1ngw4y's picture

popo nice one

big slick crap

Carlyle Groupie's picture

"Gotta let 'em fail. Then re-structure."

Any idea how much US debt, Corporate debt, consumer debt that these banks are sitting on?

Are you sure you don't want a few ounces of the shiny stuff paarsons?

If you let these banks fail, EVERYTHING goes down with them.

i-dog's picture

"If you let these banks fail, EVERYTHING goes down with them."

Versus....?

strannick's picture

Versus letting them stand, and everything going down without them

Carlyle Groupie's picture

Versus....?

I could explain to you but I doubt your dim wits would recognize what the only option is at this point.

i-dog's picture

Have a go, anyway, Einstein! ... I'm sure all the others would like to hear, while I dribble over your "erudite solution". ;-)

Arius's picture

enlighten us ...w/ a bazooka pls ... yeah we get it ... pointing the gun to your head - you get your way or the end of civilization correct?

Carlyle Groupie's picture

Extend and pretend. Tax, war, confiscation, print, death, enslavement. idog does not yet understand how it all works. The tribe will remain dominant.

The best 2 hours history lesson you'll ever get.
http://www.youtube.com/watch?v=swkq2E8mswI

i-dog's picture

 

"Tax, war, confiscation, print, death, enslavement."

So, this is your definition of everything NOT going down? Wow ... Erudite, indeed! How could I have missed such a simple solution to the current problems of tax, war, confiscation, printing and enslavement?!

zzzzzzzzz.....

Carlyle Groupie's picture

So, this is your definition of everything NOT going down?

When the fuck did I ever say it was MY definition of everything NOT going down.

Read the print. Do NOT overlay your perverted thoughts on top of what you read.

You like to argue with others by telling them what they said.

Stupid fuck. Ask Tylers if you can take a few days off and rest.

i-dog's picture

Ahhh ... more insults?! ... the refuge of the intellectual cripple ... the bastion of the immature child....

Well done, Einstein! When you've finished doing your homework, and put your toys away, come back with something of value that we adults can chew on.

mayhem_korner's picture

 

 

Well played, i-dog.  But you only get 1/2 a win for that, as it was obviously a non-conference, pushover game. ;)

Sancho Ponzi's picture

Last time I checked the folks in Iceland are recovering nicely after their monster banks failed. You get an 'F' in History, Carlyle Groupie.

BurningFuld's picture

You guys just don't get it. The solution is very very simple.

Legalize Pot!  Doh!

jcaz's picture

Hey look-  Robo has a new screen name.......

i-dog's picture

No. This insidious troll is far more dangerous! He's a paid shill for the Vatican and expends most of his posts here trying to stir up violence and anti-joo sentiment. Check his previous posts.

PS. I'm as WASP as they come, but can see right through his MO.

Cliff Claven Cheers's picture

Here is a good solution to the world wide debt crisis.

http://news.bbc.co.uk/2/hi/programmes/hardtalk/9641873.stm

Economist Steve Keen is one of the few economists to have predicted the global financial crisis and now he says we are already in a Great Depression. He says the way to escape it is to bankrupt the banks, nationalise the financial system and pay off people's debt.

Escapeclaws's picture

I always thought that would be the way to go myself. It seems so natural and obvious.

I had gone to Steve Keen's website to see if he had anything to say about the latest installment of the European crisis and ran across this video that you post.  I had hoped to see the whole program but couldn't find a way to do that.  Steve Keen is one of the few economists in the world who is not part of the neo-classicist disinformation campaign and in fact, he sees right through them.  It used to be that the choice was between the Keynsians and the neo-classicists (and the Austrian school--don't want to leave them out), but now there is Steve Keen who is using a dynamical systems approach to the economy.  One of his great insights is that the neoclassicists leave money and debt out of their calculations!

I see him proferring this solution to give the people instead of the banks the money, but he must know that could never happen.

tumblemore's picture

"but he must know that could never happen."

I think it could happen in small doses as long as you didn't state what you were doing as that would mindfuck people. For example, a government stepping in as house prices collapsed and nationalising and freezing mortgages as an emergency measure and then under the cover of that paying x thousand off of every home mortgage and the equivalent sum to anyone with a paid off mortgage to make it "fair".

CPL's picture

If you read it, digest it, you'll understand that it's nothing but another trickle down economic plan.  Didn't like Keen in the 80's, 90's or now.  Reagan sock puppet if there ever was one.

 

Completely worthless, but don't let me stand in your way of wasting your own time.

spinone's picture

I think that it could happen, if the banks are nationalized.  Unpayable debt has tobe written off and the assets marked to market. Clear out the dead wood. In addition, the rule of law has to be applied to the financial system, arrests made and justice done.

Then, the economy can rebuild.

But politically, this can't happen because the politicians and regulators are beholden to the financial system and the money it contributes.  The financial system meaning the primary dealer banks and those connected with them.  So the money that influences politics comes straight out of the FED.

Are you kidding's picture

"He says the way to escape it is to bankrupt the banks, nationalise the financial system and pay off people's debt."

Sure...great for the "little people"...but do you really think the rulers of the world...the bankers...are going to let you take away their banks?  Good luck with that without a REAL revolution.  The bankers put the lawmaker there...it'll never happen.

Carlyle Groupie's picture

Feel the need to tell us that you are oh-so WASPy? For clarity or for credibility or both? ASLMH lil buddy?

Don't you hate these anti-message guy's Mr. WASPy?

Dr. Norman Finkelstein
http://www.youtube.com/watch?v=A5drXEXkf9s

http://www.realzionistnews.com

http://electronicintifada.net/blog/nora/hollywood-actors-visit-israel-tr...

They first need to be controlled, and there's a long list of them. Then come after the others.

Jeesh, all this awakening is going to cost Papa Murdoch lots of shekels.

http://www.youtube.com/watch?v=O1nalV9tlyM

Sancho Ponzi's picture

There's no apostrophe in guys, nitwit.

SMG's picture

He is here to disrupt, but not for the Vatican, as you keep incorrectly insisting in many of your posts, but for the Luciferian Illuminati or some of their agents.

i-dog's picture

Exactly the same thing (since the Jesuits took over the papacy in 1878). Who do you think started the Illuminati? and politically controls the Sabbateans? ... a couple of bearded, head-nodding rabbis in Jerusalem? Get real.

jm's picture

So... if I understand you, one guy above blames Jews and you now blame Catholics... for something nameless but terrible. 

And with that, the comment section just gets more and more paranoid.

 

 

i-dog's picture

I didn't say Catholics, I said Jesuits ... big difference. Read up on the Jesuits and Sabbateans and their relationship ... long before Rothschild came on the scene (even though he is a Sabbatean, not a 'jew'). Or don't ... I could care less. I'm interested in solutions, not blame - but the solutions do require some knowledge of the causes.

Carlyle Groupie's picture

The israeli type is the cause dummy.

We are the chosen people, all others will be our captures our slaves.

Strong men must rise up and end this elitism once and for all!

jm's picture

How hypocritically deluded you fringe types are.

The stupid conspiracy theories such as the ones I read in this post do nothing but assess blame on large groups most of which have no more connection to the problem than the first person you and I. 

The problem is collective.  The cause is too much debt given and taken. The solution is time and shared sacrifice.

If Jews, Sabbateans, luciferians, rastafarians, illuminaries, Keynesians, <insert fringe conspiracy blame group> weren't around, the weak-minded would seek blame some other group for problems they are partly responsible for. 

The song and dance of problem, cause and solution would be exactly the same.  This is the true and sad lesson of history that I despair that we will never escape.

i-dog's picture

 

"How hypocritically deluded you fringe types are.

The stupid conspiracy theories such as the ones I read in this post do nothing but assess blame on large groups most of which have no more connection to the problem than the first person you and I."

Thanks for the compliments, but it is you who is deluded! ... and deliberately mis-stating my position. When I blame "the jesuits", I'm not including all novices and adherents - any more than someone blaming "the government" is blaming all junior congressmen and administration clerks, or someone blaming "Exxon" is blaming all clerks and oil riggers. The blame lies at the controlling boards, steering committees and willing subordinate activists (or 'initiates', in the case of secret societies).

In the case of the Jesuits, the ideology, mission and strategies are managed, refined and passed to each new generation of elected activists through the decades and centuries ... just as Exxon Corporation and its 'corporate culture' will survive David Rockefeller and continue the mission.

You are only confusing yourself, while burying your head in the sand.

SMG's picture

I wish all of this wasn't true and it was all just me being paranoid, but unfortunately we have to deal with the world the way it is. 

Here's your solution.  The world is ruled by a committee of people from Illuminati royal families, including the Rothschilds. There's your cause. They've been rigging the system for a massive collapse, using people's weaknesses against them, distracting them, brainwashing them, terrifying them, and they are the ones who must be held accountable for this evil.  

You can blame the Jesuits or whoever all you want, but they are just tools for the ruling committee. One of the Illuminati techniques is to blame all kinds of other people, jews, jesuits, whatever, so that when horrible things happen, they don't get blamed and escaped unharmed.   

Don't spread misinformation for them, they are evil.  Thanks.

jm's picture

Did the "Illuminati" really make Greece and Italy take take on too much debt?

Did the "Illuminati" make banks issue ninja loans, and debtors take out the debt?

What, pray tell, did they stand to gain by an unsustainable increase in debt?  Revolution?  Trust me people that have don't want revolution.

Want to blame something?  Blame interest rates that have been too low too long.  Not evil, just human hubris and stupidity.

SMG's picture

And who sets interest rates?

The Illuminati control the world banking system, and are in control of the Federal Reserve and other world central banks.  The same federal reserve who controls interest rates.

The also control the governement of Italy and Greece, look who's in charge now for goodness sake in Italy.  A Council on Foreign Relations member.  And what the hell is a Technocrat anyway?  Doesn't sound very democratic to me. 

They want to blow everything up so they can rebuild things the way they want, child rape and all.

I would say they are about 99% responsible.   The point you are making is akin to blaming somebody who gets mugged while walking in the park saying it's their fault. It''s like you are saying 'She should have been never been walking there".  But really it is the EVIL mugger who committed the act, taking advantage  of a weaker person.