The Fed Now Owns Over $2 Trillion In Mortgages, What Else?

Since COVID hit, the Fed has been on a massive balance sheet expansion program. Let's look at the details in a pair of charts.

Fed's Balance Sheet Summary

  1. Total Balance Sheet: $7.093 Trillion
  2. Treasuries Owned Outright: $4.431 Trillion
  3. Mortgage Backed Securities Owned Outright: $2.025 Trillion
  4. Treasuries Plus Mortgages: $6.456 Trillion
  5. Gold: $11 Billion

Gold Comments 

The gold certificate account reflects the receipts issued to the Reserve Banks by the Treasury against its gold holdings. In return, the Reserve Banks issue an equal value of credits to the general account of the Treasury computed at the statutory price of $42.22 per troy ounce. Because nearly all of the gold held by the Treasury has been monetized in this fashion, the Federal Reserve Banks' gold certificate account of $11 billion represents the nation's entire official gold stock.

If the Fed valued gold at $2,000 per ounce instead of $42.22 per ounce it would be worth about $0.5 trillion. 

What's in the Gap Between Treasuries + Mortgages and the Total?

The Fed publishes balance sheet details every Thursday in a Federal Reserve Statistical Release, affectionately known as H.4.1.

Balance Sheet Details

Fed's Balance Sheet Details 2020-09-24

Explaining the Gap

  • Primary Dealer Credit Facility
  • Money Market Liquidity Facility
  • Paycheck Protection Liquidity Facility
  • Commercial Paper Funding Facility II
  • Corporate Credit Facilities
  • TALF II
  • Central Bank Liquidity Swaps
  • Foreign Currency Assets 
  • IMF Special Drawing Rights
  • Currency

When liquidity gets messy, the Fed steps up to the plate with massive amounts Repos (temporary funding, sometimes with very long durations), but the current value of repos is zero.

Illegal Facilities

Many of the Fed facilities violate their charter and are thus illegal.  

John Hussman explains in Fundamentally Unsound.

If you are primarily interested in Fed illegal activities and not Hussman's comments on valuations, start reading at the following subtitle.

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