Tuesday, June 9, 2009

What's in the Bag: June 2009 Edition

It would be nice to know what's in the bag because ultimately we, the taxpayer, are holding it.

The Fed's liabilities remain fairly understandable. They consist of currency (which can't be redeemed), deposits from the Treasury, and excess reserves on deposit from commercial banks.

This shows better how much non-traditional liabilities have grown.

This side of the balance sheet remains as clear as mud. Who issued the commercial paper? What collateral did banks bring to the anonymous replacement for the discount window (the TAF)? What garbage was transferred from Lehman to the Maiden Lane LLCs? What's backing the AIG credit line? What countries are on the other end of the foreign currency swaps (the "Other" line)?

The big green blob at the bottom is headed back towards its previous share. That's gotta be good, right? Well, "Securities" now includes not just Treasury Bonds and Notes and TIPS (not so many of these), but also "Federal agency debt" and "Mortgage-backed securities". Yeesh.

I actually think it's unlikely that the Fed has taken on a dangerous amount of risk. And if we get to a point where the Fed is taking big losses on its books, well, the issue would be moot because the economy would have completely imploded. But I don't know if I'm right or wrong. I certainly would like to know.

Update: The Fed's Inspector General is either really bad liar or a total idiot. What an embarrassing performance.

Update the second: Somebody (I gotta start saving this stuff) made the argument that the TARP money being repaid today shouldn't be accepted unless the banks have weaned themselves from all other support programs. The Fed's balance sheet probably is one such program. But, of course, we don't know that.

Update: Results - I get them.

Updatier update: I had forgotten that the Fed is paying interest on those excess reserves. The banksters aren't going to be making withdrawals anytime soon.

No comments: