A LOOK INSIDE THE FED´S BALANCE SHEET / THE NEW YORK TIMES ( VERY HIGHLY RECOMMENDED READING - CHECK GREAT INTERACTIVE GRAPHICS )

June 15, 2010, 10:35 AM ET.

A Look Inside the Fed’s Balance Sheet

By Phil Izzo

See a full-size version. Click on chart in large version to sort by asset class. Click and drag your mouse to zoom in on the chart. Clicking the check mark on categories can add or remove elements from the balance sheet.

CLICK ON : http://blogs.wsj.com/economics/2010/06/15/a-look-inside-the-feds-balance-sheet-2/tab/interactive/


Assets on the Fed’s balance sheet contracted a bit in the latest week, falling to $2.314 trillion from $2.318 trillion. The bulk of the decline came from a reduction in liquidity swaps to allow foreign central banks access to dollars. The program was re-established to help boost dollar liquidity as the European debt crisis accelerated. But demand has been tepid. The facility saw a bit of a spike two weeks ago, but dropped back down around $1.24 billion. The value of the Fed’s mortgage-backed securities rose slightly. The central bank has stopped new purchases of the securities, but the portfolio valued at more than $1 trillion still posts gains and losses. Despite a high-profile re-establishment last week of central bank liquidity swaps to allow foreign central banks access to dollars, the program was flat in the latest week at around $9.2 billion. Direct-bank lending has reach lows not seen since the failure of Lehman Brothers in 2007.

In an effort to track the Fed’s actions, Real Time Economics has created an interactive graphic that will mark the expansion of the central bank’s balance sheet. The chart will be updated as often as possible with the latest data released by the Fed.

In an effort to simplify the composition of the balance sheet, some elements have been consolidated. Portfolios holding assets from the Bear Stearns and AIG rescues have been put into one category, as have facilities aimed at supporting commercial paper and money markets. The direct bank lending group includes term auction credit, as well as loans extended through the discount window and similar programs.

Central bank liquidity swaps refer to Fed programs with foreign central banks that allow the institutions to lend out foreign currency to their local banks. Repurchase agreements are short-term temporary purchases of securities from banks, which are looking for liquidity and agree to repurchase them on a specified date at a specified price.