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The development of quantitative easing as a go-to tool for the Fed in times of crisis has led to an unprecedented focus on one of its traditionally unremarkable aspects – the Fed total assets. Just as with any other firm, securities that the Fed purchases are considered assets and therefore are represented on the Fed’s balance sheet.
But readers may not have focused on the fact that the Fed is also shrinking its balance sheet, also known as quantitative tightening. Recall that in 2020 and 2021, the Fed figuratively printed $5 trillion in new cash and bought Treasury securities and mortgage-backed securities at a rate of $90 billion per month.
The chart below is reproduced from the latest version of Thomas Kingsley’s tracker of the Fed’s balance sheet. As one can see, the balance sheet ballooned to $9 trillion in early 2022 as the Fed bought $60 billion per month in Treasury Securities and $30 billion per month of mortgage-backed securities. In the process, the Fed pumped nearly ...
The Fed disclosed in its weekly reserve balance report that it had purchased $12 million in loans via the Main Street Lending Program in its first day of operation. As some analysts question the takeup of the program, the Fed also announced that it had modified the Main Street Lending Facility to allow a wider range of non-profits to apply ...
The Federal Reserve’s balance sheet topped $7 trillion for the first time in history, according to newly released figures. AAF’s Director of Financial Services Policy Thomas Wade is tracking the Fed’s latest actions in response to the coronavirus pandemic as well as the overall magnitude of its direct interventions. While the Fed is ...
Since Basel, the Fed has applied two key capital requirements to U.S. banks: the ratio of T1 capital to total assets (the leverage ratio); and the ratio of T1 and T2 capital to risk-weighted assets (RWAs). The leverage ratio is perhaps the simplest tool available to regulators for determining bank capital requirements.
This is bigger (nearly twice as big) and faster than the last time the Fed started reducing its balance sheet. That point was hammered home by Vice Chair Lael Brainard in a speech on Wednesday: “The [FOMC] will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance ...
This therefore is the most reflective guide of the state of quantitative easing and, by extension, the degree to which the Fed has deemed it necessary to intervene in the economy. As of September 16, the Fed’s balance sheet stands at $7.1 trillion, up from $4 trillion at the beginning of 2020.
Recall that the balance sheet expands when the Fed buys Treasuries or mortgage-backed securities (MBS). The flip side to those purchases is cash injected into financial markets, so the increased size of the balance sheet is a measure of the monetary stimulus floating around in markets. Reducing the size of the balance sheet is reducing stimulus ...
This is a position lacking in nuance, a factor the Fed appears to recognize in noting that “higher supervisory and regulatory requirements may not have prevented the firm’s failure.” Depositors at SVB attempted to withdraw 25 percent of the bank’s balance sheet in about ten hours.