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The magnitude of the Federal Reserve’s extraordinary operations during the past year shows through clearly in its balance sheet and income statement, recently published in the Fed’s Annual Report 2008. Nevertheless, the new Annual Report and associated Fed reporting documents still fall far short of the disclosure standards that any other major American corporation ordinarily would be expected to observe. Below is a summary of balance sheet items for the Fed. It shows the acquisition of great quantities of asset classes that are far riskier than the U.S. Treasury securities traditionally held by the Fed.
| Federal Reserve Banks Combined Statements of Condition
(Amounts in millions of dollars for year-end dates) | | | 2008 | 2007 | Difference | | Selected Assets | | Loans to depository institutions | 544,010 | 48,636 | 495,374 | | Loans to others (Section 13(3) and other non-bank loans) | 100,082 | 0 | 100,082 | | System Open Market Account–Domestic Operations | | | Repos: Securities purchased with agreement to resell | 80,000 | 46,500 | 33,500 | | | US government, federal agency, and GSE securities | 502,189 | 745,629 | -243,440 | | System Open Market Account–Foreign Operations | | | Investments held in foreign currencies | 24,804 | 22,914 | 1,890 | | | Central bank liquidity swaps (foreign exchange swaps) | 553,728 | 240,00 | 529,728 | | Investment in variable interest entities (i.e. AIG, Bear Stearns, etc.)* | 411,996 | 0 | 411,996 | | *Note: Of this $411,996 million, $74,570 million is said to be measured at "fair value." The rest is carried at historic cost or book value. | | Total assets | 2,245,728 | 914,776 | 1,330,952 | | | | Selected Liabilities | | Federal Reserve notes outstanding (currency), net amount | 853,168 | 791,691 | 61,477 | | System Open Market Account–Domestic Operations | | | Reverse repos: Secs. sold with agreement to repurchase | 88,352 | 43,985 | 44,367 | | Amounts owed to others for variable interest entities | 8,637 | 0 | 8,637 | | Deposits: Depository institutions (reserve balance at Reserve Banks) | 860,000 | 20,767 | 839,233 | | | US Treasury, general account | 106,123 | 16,120 | 90,003 | | | US Treasury, supplemental financing account | 259,325 | 0 | 259,325 | | | Other deposits (Fannie Mae, Freddie Mac, and other) | 21,671 | 363 | 21,308 | | Total non-capital liabilities | 2,203,576 | 877,876 | 1,325,700 | | | | Capital paid in | 21,076 | 18,450 | 2,626 | | Surplus (incl. other comprehensive loss of amounts shown) | -4,683 | -1,524 | -3,159 | | | Surplus net of charges in preceding line | 21,076 | 18,450 | 2,626 | Total capital
| 42,152 | 36,900 | 5,252 | Total liabilities and capital
| 2,245,728 | 914,776 | 1,330,952 | Source: Board of Governors, 2008 Annual Report
Note: Totals do not match due to omissions and rounding
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This commentary is based on a longer article by William F. Ford and Walker Todd examining the Fed's balance sheet in the latest issue of Research Reports, available free to AIER subscribers or $2 for non-members. Also in this issue:
- Business Cycle Conditions - June 2009, Polina Vlasenko, Research Fellow
- A Collapse Made in Washington, Richard M. Ebeling, Senior Fellow
- Ask the Expert: Online Lawyering, Steven J.J. Weisman
To subscribe to AIER Research Reports, please become a Sustaining Member of AIER. Membership starts at just $39 per year.
Already a member? Keep your eye out for the July 6 issue of Research Reports hitting your mailbox or inbox soon.
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