Download THE FED THE FED THE FED

THE FED THE
FED THE
FED
AN UPDATE ON THE FED BALANCE SHEET.
BY JONATHAN BRICE
Agenda
 What is a balance sheet?
 Current makeup of the Fed Balance sheet
 Recent Trends
 Outlook
 Run for the hills?
Balance Sheet
 A summary of the financial balances of the Fed.
 Lists the Fed’s current Assets and Liabilities
 For typical firm it would list A =L+OE, for the Fed it lists A=L+
Capital Accounts
 Original report contains 12 sections
 Released every Thursday afternoon around 4:30
p.m.
Current Assets (March 25 release)
 Largest Assets:


Securities, repurchase
agreements, and etc
(91%)
The Fed (typically)
makes billions of
dollars on these assets
 Smallest Assets:


CB Liquidity swaps
(0%)
Repurchase
Agreements (0%)
Current Liabilities
 Largest Liabilities:


Depository
Institutions (51%)
Fed Notes (39%)
Asset Trends
Selected Asset Trends
Fed Liquidity Facilities
Fed Institutional Supports
Selected Fed Liabilities
Summary of the Evolution
 Phase1 : Efforts to provide short-term funding to the
markets (Foreign-Exchange Swaps)
 Phase 2: As the liquidity facilities wound down, the
BS shifter towards the assets acquired under large
scale asset purchase programs (MBS)

$1.8 trillion of Treasury, agency and mortgage-backed
securities
Outlook: Phase 3
 The Fed will finish their purchase of MBS this week
 The Fed has tapered off purchases as programs
approach their end, in order to help mitigate any
possible adverse reactions
Potential Risk
 The banking system currently has more than $1
trillion in reserves
 The Fed must implement a strategy to successful
shore up liquidity
 Inflation?