Wikinvest Wire

The Fed's balance sheet - 11 months later

Wednesday, January 06, 2010

Here's another graphic that I've been meaning to whip up for a while now, one that takes those messy stacked area charts and does a simple snapshot of the Federal Reserve's balance sheet from early in 2009, when the financial crisis was at its peak, to the end of 2009.
IMAGE Recall that it was in late-2008 when the Fed's balance sheet first ballooned from about $900 billion to over $2 trillion when all manner of emergency lending programs were launched. For the last few months of 2008, most of the newly created assets were categorized as "Other" until things settled down a bit early in 2009.

The moral of the story here is that, a once pristine balance sheet filled with Treasuries was transformed into a jumble of assets that no one else wanted. Then, over the last eleven months, it changed back into a more tidy collection of Treasuries and mortgage related assets that, apparently, nobody else really wanted - at least not at the price that the Fed paid.

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Chuck Ponzi said...

That, my friends is how debt monetization works.

{bows} Thanks, folks, now leave your deflation slips at the door before you leave.


Anonymous said...

Yeah, all that really happened was that the banks "paid off" their alphabet soup of loans from the fed with the only thing they had in their vaults:

Mortgage Backed Securities!

And you can bet that Bernakie "didn't abuse his power". The phrase he likes to use when he screws the taxpayer.

Anonymous said...

I don't really care what it is filled with so much as I care who the Fed stole the resources from to buy the MBS with. Those resources belong to consumers, not the central bank. How dare the bank claim ownership of them.

Anonymous said...

Don't worry, I can tell you what the fed is going to do with mortgages that default (probably 50% rates just like GD1)...

The real estate is going to be tranferred to the GSE's (Freddie/Fannie) and US housing will be socialized. You will be able to rent homes from Uncle Sam just like old USSR!

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