Turning the Titanic around takes time, apparently.
In late September, the Federal Reserve announced it would begin reducing its balance sheet, reportedly saying it would reduce its securities holdings by about $10 billion in October.
Since that September 20 announcement, however, the total assets reported at the Federal Reserve Banks have actually risen by $2 billion. Granted $2 billion was just a tiny slice of the $4.461 trillion on the balance sheet at October 26.
The Fed will release its weekly “H.4.1” statistical report later this afternoon. What do you think it will report for total assets? Closest guess in the comments section below before 3:30 pm CT wins a cookie.
We will address this significant matter – and the accounting issues – in more depth soon.
UPDATE: Friday, November 3
Total assets came in at $4.456 trillion, down $5 billion from the previous week. That $5 billion decline means assets declined just 0.1%. With capital reported at $41.2 billion, the capital / asset ratio (less than 1%) depicts highly leveraged, and risky, institution.
It's important to note that this result arrives according to the Fed's own accounting. The Federal Reserve sets its own accounting standards, a topic for another day. Among other things, it doesn't mark its securities portfolio 'to market.' Taxpayers and the public purse are exposed in the event of significant interest rate increases and/or credit quality deterioration, if any, in that portfolio.