Quarterly Report on Federal Reserve
Balance Sheet Developments
|Abbreviations||Overview||Monetary Policy Tools|
The Overview section of this report highlights recent developments in the operations of the Federal Reserve's monetary policy tools, and presents data describing changes in the assets, liabilities, and total capital of the Federal Reserve System as of February 27, 2013.
Federal Reserve Board Releases Financial Statements for Calendar Year 2012
- On March 15, 2013, the Federal Reserve System released the 2012 annual audited financial statements for the combined Federal Reserve Banks, the 12 individual Reserve Banks, the consolidated variable interest entities (VIEs) that were created by the Federal Reserve to respond to strains in financial markets, and the Board of Governors. Total Reserve Bank assets as of December 31, 2012, were $2.9 trillion, which is approximately the same level as the previous year. The Reserve Banks reported net income before providing for remittances to the U.S. Treasury of $90.6 billion in the year ended December 31, 2012, an increase of $12.0 billion from the year prior. The Reserve Banks' net income was derived primarily from $80.5 billion in interest income on securities acquired through open market operations (OMOs)--Treasury securities, government-sponsored enterprise (GSE) debt securities, and federal agency and GSE mortgage-backed securities (MBS). Realized gains on sales of Treasury securities during the year were $13.3 billion, and net earnings attributable to the consolidated VIEs that were created to respond to strains in the financial markets totaled $6.0 billion. The Reserve Banks provided for payments of $88.4 billion of their 2012 net income to the U.S. Treasury. The Federal Reserve System financial statements are available on the Federal Reserve Board's website at www.federalreserve.gov/monetarypolicy/bst_fedfinancials.htm.
FOMC Announces Purchases of Additional Longer-Term Treasury Securities
- On December 12, 2012, the Federal Open Market Committee (FOMC) announced that in order to support a stronger economic recovery and to help ensure that inflation, over time, is at a rate consistent with its statutory mandate, the FOMC would continue purchasing additional agency MBS at a pace of $40 billion per month. The FOMC also announced that it would begin purchasing longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of 2012, initially at a pace of $45 billion per month. In addition, the FOMC decided to maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS and, in January, to resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. More information is available on the Federal Reserve Board's website at www.federalreserve.gov/newsevents/press/monetary/20121212a.htm.
Federal Reserve, Treasury Terminate Credit Protection for the TALF
- On January 15, 2013, the Federal Reserve and the Treasury Department agreed to terminate the Treasury's credit protection commitment for the Term Asset-Backed Securities Loan Facility (TALF) as well as the Federal Reserve Bank of New York's (FRBNY's) funding commitment to TALF LLC. These commitments were no longer deemed necessary because the accumulated fees and income collected through TALF and held by TALF LLC exceed the amount of TALF loans outstanding. In addition, TALF LLC repaid in full the outstanding principal and accrued interest on subordinated funding previously provided by the Treasury. The Federal Reserve Board also authorized TALF LLC to begin distributions of excess accumulated fees and income earned by TALF LLC to the Treasury and the FRBNY. Treasury will receive 90 percent of the distributions and the FRBNY will receive 10 percent. TALF LLC will retain funds in an amount that at all times equals the current outstanding TALF loan balance plus funds reserved for future expenses of TALF LLC. More information is available on the Board's website at www.federalreserve.gov/newsevents/press/monetary/20130115b.htm and www.federalreserve.gov/monetarypolicy/files/BSTTALFLLCfinstmt2012.pdf.
FOMC Authorizes Extension of Temporary Liquidity Swap Arrangements with Other Foreign Central Banks
- On December 12, 2012, the FOMC authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2014. In addition, the FOMC authorized the extension, also through February 1, 2014, of the existing network of temporary bilateral swap arrangements with these five central banks that provide liquidity in each jurisdiction in any of their currencies if necessary. More information is available on the Board's website at www.federalreserve.gov/newsevents/press/monetary/20121213a.htm.
FRBNY Announces Treasury Operations Counterparty Pilot Program
- On February 20, 2013, the FRBNY announced the introduction of a pilot program for a few small broker-dealers to act as new counterparties in Treasury market operations it conducts for the System Open Market Account (SOMA) portfolio. Pilot program participants, who have yet to be selected, will participate in FRBNY operations to conduct secondary market outright purchases or sales of U.S. Treasury securities along with primary dealers, but will not be eligible to participate in other types of OMOs. The program will run for about one year--a period long enough for the FRBNY to evaluate the benefits and costs of a wider range of participants in its SOMA operations. More information is available on the FRBNY's website at www.newyorkfed.org/newsevents/news/markets/2013/an130220.html and www.newyorkfed.org/markets/toc_announcement.html .
FRBNY Releases Detailed Information on the Transactions of Maiden Lane III LLC
- On November 23, 2012, the FRBNY released CUSIP-level detail of the transactions completed in Maiden Lane III LLC, a special purpose vehicle that was created in 2008 as part of the government's support of American Insurance Group, Inc. (AIG).2 The publication included a summary of the allocation of cash flows generated from Maiden Lane III LLC assets, the initial positions acquired from AIGFP counterparties, as well as subsequent asset purchases and sales. More information is available on the FRBNY's website at www.newyorkfed.org/markets/maidenlane/xls/MLIIItransactiondata.xls .
Federal Reserve System Selected Assets, Liabilities, and Total Capital
Table 1 reports selected assets and liabilities and total capital of the Federal Reserve System and presents the change in these components over selected intervals. The Federal Reserve publishes its complete balance sheet each week in the H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Consolidated Statement of Condition of Reserve Banks," available at www.federalreserve.gov/releases/h41/.
Figure 1 displays the levels of selected Federal Reserve assets and liabilities, securities holdings, and credit extended through liquidity facilities since April 2010.
Table 1. Assets, liabilities, and capital of the Federal Reserve System
Billions of dollars
|Item||Current February 27, 2013||Change from October 31, 2012||Change from February 29, 2012|
|Securities held outright||2,839||+260||+236|
|U.S. Treasury securities 1||1,750||+104||+88|
|Federal agency debt securities1||74||-8||-27|
|Mortgage-backed securities 2||1,016||+164||+175|
|Memo: Overnight securities lending 3||20||+9||+*|
|Memo: Net commitments to purchase mortgage-backed securities 4||107||+1||+67|
|Lending to depository institutions 5||*||-*||-*|
|Central bank liquidity swaps 6||4||-9||-104|
|Lending through the Term Asset-Backed Securities Loan Facility 7||*||-*||-7|
|Net portfolio holdings of TALF LLC 8||1||-*||-*|
|Support for specific institutions||1||-*||-30|
|Net portfolio holdings of Maiden Lane LLC 9||1||-*||-5|
|Net portfolio holdings of Maiden Lane II LLC9||*||-*||-7|
|Net portfolio holdings of Maiden Lane III LLC9||*||-*||-18|
|Federal Reserve notes in circulation||1,129||+29||+79|
|Term deposits held by depository institutions||0||0||0|
|Other deposits held by depository institutions||1,754||+320||+147|
|U.S. Treasury, general account||16||-84||-47|
Note: Unaudited. Components may not sum to totals because of rounding.
1. Face value. Return to table
2. Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value, which is the remaining principal balance of the underlying mortgages. Does not include unsettled transactions. Return to table
3. Securities loans under the overnight facility are off-balance-sheet transactions. These loans are shown here as a memo item to indicate the portion of securities held outright that have been lent through this program. Return to table
4. Current face value. Includes commitments associated with outright purchases, dollar rolls, and coupon swaps. Return to table
5. Total of primary, secondary, and seasonal credit. Return to table
6. Dollar value of the foreign currency held under these agreements valued at the exchange rate to be used when the foreign currency is returned to the foreign central bank. Return to table
7. Book value. Return to table
8. As of February 27, 2013, TALF LLC had purchased no assets from the FRBNY. Return to table
9. Fair value, reflecting values as of December 31, 2012. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Fair values are updated quarterly. Return to tableReturn to text
2. The FRBNY lent approximately $24.3 billion to Maiden Lane III LLC to fund the purchase of certain asset-backed collateralized debt obligations from certain counterparties of AIG Financial Products Corp. (AIGFP) on which AIGFP had written credit default swaps and similar contracts. The FRBNY's loan to Maiden Lane III LLC was repaid in July 2012, and the remaining securities in the Maiden Lane III LLC portfolio were sold in August 2012. Return to text