The Fed’s Balance Sheet

Dr. Janet Yellen presented at the Certified Financial Analysts Institute Annual Conference yesterday. The slide show that accompanied here speech is today’s chart porn.

New facilities change the composition of Fed’s balance sheet


Hat tip Calculated Risk

Dr. Yellen noted the many ways the Fed has worked to improve market liquidity:

-Enhanced discount window lending
Reduced rate spread and lengthened term of lending

-Established Term Auction Facility (TAF)
Term discount window loans at auction rate; $150 billion

-Initiated term repurchase (repo) transactions
Agency debt accepted as collateral for 28-day repos; $100 billion

-Established Term Securities Lending Facility (TSLF)
Lends Treasuries for highly rated ABS; up to $200 billion

-Provided financing for acquisition of Bear Stearns
Term financing to support purchase by JP Morgan; $29 billion

-Established Primary Dealer Credit Facility (PDCF)
Overnight borrowing from discount window by primary dealers

Speech to the Certified Financial Analysts Institute, Annual

Vancouver, British Columbia
Janet L. Yellen, President and
CEO, Federal Reserve Bank of
May 13, 2008,
10:00 AM Pacific time, 1:00 PM Eastern

Credit, Housing, Commodities and the Economy

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What's been said:

Discussions found on the web:
  1. Mark E Hoffer commented on May 14

    Which firm was it that signed off on the FedRes’ audit last year?

  2. Mike J commented on May 14


    I recommend changing the “certified” to “chartered” before you get crucified by the Institute or some of its members . . .

  3. michael schumacher commented on May 14

    this is same Ms. Yellen who said “I sleep well at night knowing home prices are improving” last year???

    Yet another reason ‘academics’ should be banned from holding any meaningful job at the fed.


  4. HCF commented on May 14

    I’m not a huge Janet Yellen fan, but to be fair to the Fed, at least they usually try to put the data out there for all to see without a screaming (positively spun) headline. It’s more than we can say about the BLS and the other stooges at various federal agencies with their fudge factors, bull shitting, and magical mathematical manipulation.

    In another note, does anyone else here want to auto-asphyx themselves whenever Dennis Kneale is on CNBC and says “Sell the hope, baby”? What qualifications does this guy have anyways? Could they not borrow a trained chimpanzee from the zoo for cheaper?

  5. Mista B commented on May 14

    All of these lending facilities could just be combined into the the Confusing Rubbish And Poop (C.R.A.P.) facility. Do we really need multiple facilities (now that I think of it, ‘facilities’ is the right word, as where else does crap belong?) to handle what is essentially all the same thing: assets worth maybe $0.30 on the dollar? If this doesn’t qualify as the zombification of banks, I really don’t know what does. Maybe the Fed will led the little banks go under when the CRE debt starts to implode.

  6. Kirzner commented on May 14

    As a candidate for Level 2, I second what Mike J said.

  7. Florida commented on May 14

    Does the Fed have a schedule for when the banks have to take the loans they posted as collateral back on to their books? And if so, is that published anywhere? That would be interesting chart porn.

  8. Estragon commented on May 14


    AFAIK, all these facilities can be rolled over by participants until further notice.

    That notice is unlikely to be given until either the users voluntarily stop rolling, or it’s very clear to the fed that the systemic risks have been eliminated.

  9. DL commented on May 14

    Posted @ 3:13 PM

    “Does the Fed have a schedule for when the banks have to take the loans they posted as collateral back on to their books? “

    I’ve been wondering the same thing.

    This exchange of “real money” for questionable paper is all well and good as long as the value of the paper doesn’t decline much. But what if it does decline?

    Even worse, the Fed has now created a new “entitlement” for banks. In the future, the banks will create whatever securities they want, and expect the Fed to exchange them for treasury bonds.

  10. Kalama commented on May 14

    Barry –

    Are we going to see a post on the new CPI numbers, and the markets response to them?

  11. Ruby commented on May 14

    For more clarification, search bloomberg for Jim Grant’s recent interview w/ Pimm.

    I think the Fed’s going down a slippery slope.

  12. wally commented on May 14

    It looks like the tough kids have now got half the lunch money away from that nice Fed kid.

  13. Marco commented on May 14

    “It looks like the tough kids have now got half the lunch money away from that nice Fed kid.”

    I wouldn’t worry…that nice Fed kid’s parents always seem to have lots of money…it’s like…like…they have there own printing press or something.

  14. Mich(^IXIC1881) commented on May 14

    What qualifications does this guy have anyways? Could they not borrow a trained chimpanzee from the zoo for cheaper?

    Posted by: HCF | May 14, 2008 2:26:54 PM

    The only qualification you need is willing to do or say anything for 5 minutes of air time.
    Exhibit 1a
    (watch till the end)

  15. pft commented on May 14

    People have trouble understanding money, and for good reason. Read Ellen Browns Web of Debt for help.

    Fiat money is simply a means of exchange. In the land of Oz in which we live, our government provides IOU’s to anyone who purchases them, backed by the full faith and credit of the government. When the Fed buys these IOU’s, they do not actually have any money to buy them, they create the money to buy them, and the IOU becomes an asset. Since the late 70’s, they also refund the interest paid by the Federal governement, less costs. Thus, they do not have much appetite for our IOU’s.

    Instead, the IOU’s are purchased by foreigners, and the primary dealers, a number of whom actually own the FED, and the money gets created by the Commercial banks, who also own the Fed. This is where the money is made, and where our taxes go. And we actually have to pay the interest on the IOU’s. Fortunately, interest rates have been low the last 20 years. If that changes, we are toast, unless the Fed begins buying our IOU’s.

    Back to the full faith and credit of the US government. People point to how much money we owe, over 9 trillion. In fact, looking at all liabilities, we owe 55 trillion. Hard to have faith in anyone owing this amount.

    Well, virtually all of that, except for under 3 trillion, is owed to ourselves or
    American investors. It still sounds like a lot though.

    Each year, the amount we owe goes up 500 billion, which also sounds like a lot.

    But who is we? We of course are the citizens, we have 300 million legal citizens. But wait, the Supreme Court has also ruled that corporations are citizens, entitled to the same rights as Joe Public, and presumably the same responsibilities, to pay back the government debt. So we can share the pain with our corporate buddies.

    Lets go back to that 55 trillion liability.
    Its a lot. But what are our assets. I mean, if Bill Gates owed 1 million, or spent 200 K more than his income each year, it’s chump change to him. If Johnny from Burger King owes 1 million, him and his bank are toast.

    Lets look at the US of A as just one big corporation who owns 300 million citizen workers, or maybe 150 million workers, and their property, and all of the coporate assets net liabilities. What exactly are our collective assets. Consider also that the Federal Government owns 30% of all the land in the US and the worlds biggest military machine, and our overseas facilities. Not to mention our natural resources, which are not insignificant, and the value of all private and corporate property and assets net liability, and I think our assets may very well be well north of that 55 trillion liability.

    And consider that only 3 trillion of that 55 trillion actually has to be paid with money we borrow at interest. The rest could be paid by money we create debt free. As Thomas Edison once said, any government that can issue 30 billion in bonds based on it’s credit, can issue 30 billion in cash based on the same credit.

    And BTW, back to the Fed. If you look at their balance sheet, they have 11 billion in gold. One problem, the price they use to value the gold is based on 40 dollars an oz. Today it is 20 times that, and would be much higher if not for the market manipulation. So they have 200 billion more than they say they do.

    FWIW, there is only 300 billion in cash (Federal Reserve Notes) floating around in the US (another 500 billion overseas), enough for each of you to have 1,000. The rest is just checkbook money, it exists as ink on a ledger, or memory in a computer.

  16. Winston Munn commented on May 14

    The balance sheet represents the future – compared to a year ago, would you buy or sell Fed stock based on the present state of their balance sheet?

    Giving ganstas access to the vaults doesn’t rehabilitate – it only increases the chances that the bank will be robbed.

    Wonder if MBIA wrote an insurance policy on that chance?

  17. Mike commented on May 14

    This chart shows probably the most significant thing going on with our economy right now. When the Fed runs out of treasuries, watch out. I’m concerned that this post is getting so little attention (only a few comments) compared to the others.

  18. Andy Tabbo commented on May 14

    I’m an Elliot Wave Technician. I’m in the camp that we’re going to get a SIGNIFICANT leg down in the market (1080 S&P). I always wonder what’s going to extend the next wave down.

    I don’t like to think about it, but my list comes to three possible events:

    a) a run on the Federal reserve balance sheet
    b) terrorist attack on US soil (Obama would be bad for the Al-quada jihadist business)
    c) an event that triggers severe civil unrest.

    Looking at that that Chart porn….a run on the Fed is not out of the question.


  19. AGG commented on May 15

    Too many mice are eating the cheese.

  20. blin commented on May 15


    I tend to agree. I see 1050 on the SP500. The run on the Fed is happening as we speak. The Fed’s balance sheet could be wiped out by the end of year.

    During the next downleg the Fed could lose all credibilty.

    Just look at the long bonds, they could be reversing their multi year bull run.

  21. BobC commented on May 15

    I am strictly an amateur when it comes to economics, but something about that chart makes me very uneasy. When there is such massive change in a complex system, there are often unintended and unforeseen consequences. I’d like to see it with 10 or 20 years of history. I’d feel more comfortable knowing that such major shifts in the chart are not uncommon.

  22. Marc Authier commented on May 16

    What you see is what you don’t get. It’s all baloney, crap and bull. You can thank China and slave labour camps for maintaining alive your crappy and shitty financial system. If this type of thing happened in Argentina or Turkey, the IMF would have imposed a structural plan a long time ago. They do almost antything they want, and they get away with it, because you are too stupid and we foreigners can’t get enough being abused by the FED. A kind of sado-masochist monetary and banking experiment is going on. Don’t take economics too seriously. It’s like politics; just stinking hot air. The FED is really good at it; hot air about inflation fighting, hot air about price stability. Hot air.

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