The Fed’s actions to date
Here is a great look at the latest Fed balance sheet. It summarizes everything the Fed has done since August 2007 in response to the credit crisis.
When the Fed began to widen its windows and criteria for lending to financial institutions last year, it had roughly $900 billion in assets — ie, notional credits that it manufactures in cyberspace and then uses to buy Treasury bonds from the US gov’t or, now increasingly, wounded bonds of all sorts from wounded institutions. And the Fed said it was willing to use a quarter of its balance sheet to rescue the latter.
Fast forward a year. The balance sheet has doubled, to more than 1.8 trillion — roughly $1.3 of which is wrapped up in rescues.
Thus, the commentator linked above observes:
The Fed’s first $100 billion didn’t do it. The Fed’s first $1 trillion didn’t do it. Having the Treasury take over the $5 trillion in debts and guarantees of Fannie and Freddie didn’t do it. The Treasury’s $3/4 trillion rescue/bailout package didn’t do it. And another quarter trillion will?
This (again) echoes the early 30s — when the banks took and took and took everything the Fed had to give, until, in late 1932, the people who own and operate the Fed cried Uncle and the Great Depression settled in, to endure until the stimulus of the world war.
