Fed balance sheet tops $3T for 1st time

The Federal Reserve, more concerned about stagnation than inflation, has intervened aggressively to stimulate the economy.

By Benzinga Jan 25, 2013 4:03PM
Federal Reserve Building copyright Hisham Ibrahim, CorbisBy Matthew Kanterman 

This week marked a historic event for the Federal Reserve, the monetary institution that has seen its share of historic events since the onset of the financial crisis in 2007. The Fed's balance sheet grew to $3 trillion for the first time ever -- the largest in the Fed's nearly 100 year history.

The Fed began purchasing $85 billion per month earlier in January as part of its expanded third round of quantitative easing. Initially, the Fed had planned to purchase $45 billion per month in mortgage backed securities.

However, with the expiration of the second Operation Twist in December, the Fed rolled the purchases of treasury bonds into QE3 and began purchasing a total of $85 billion per month in securities this month.

As of Jan. 23, the Fed's balance sheet climbed by $48 billion to $3.01 trillion, according to a release from the central bank Thursday from its Washington headquarters. The announcement coincided with the S&P 500 closing at its highest level since December 2007 as the index nears the psychological 1500 level.

The recent moves by the Fed are being called the most revolutionary policy measures taken by the central bank since its inception, potentially second only to Paul Volcker in the 1970's. Volcker, the Fed Chairman from 1979 to 1987, raised interest rates as high as 22% during his tenure, to end the stagflation that plagued the era and cool inflation.

Under Bernanke, the Fed has embarked upon three rounds of quantitative easing, two rounds of Operation Twist, rate cuts, currency swap lines, and an alphabet soup of repurchase facilities aimed at stabilizing the financial system in 2008.

Under Bernanke, the Fed has had to focus less on inflation and more on deflation. The Fed's dual mandate, full employment and stable inflation, has led the Fed to adopt an informal inflation target of 2.5% PCE inflation and 6.5% unemployment.

With inflation trending below the target and unemployment stuck around 8% for months, the Fed has kept easing policy to achieve these targets.

The future of the Fed policy decisions remains shrouded in some mystery. The new FOMC members, the policy-setting committee of the Fed, took seats this month and the committee has a slightly more dovish tilt than in previous years.

Also, Chairman Bernanke, the architect of many of these crisis-fighting policies, is set to retire from his role as Chairman at the end of 2013 and no successor has been named as of yet. Leading candidates include current Fed Vice-Chairman Janet Yellen and former Treasury Secretary and Current Harvard University President Larry Summers.

More from Benzinga
Jan 25, 2013 5:04PM
3 Trillion built with a printing press.
Jan 25, 2013 5:28PM
That's a very expensive house of cards.
Jan 25, 2013 5:34PM
Helicopter Ben has spent years cooking up a giant crap sandwich.  Won't be long before we'll all have to take a bite.
Jan 25, 2013 5:37PM
In reality it's more like 29 trillion. You are being coaxed and deceived. Dig deeper, the true data is out there.



it's the off balance sheet that worries me. It is north of $35 trillion right now and growing all the time.



Jan 27, 2013 9:45AM

Is there anyone that disagrees that we need to at least follow Ron Paul's plan and AUDIT the FED so we know just where it stands?   After all this is Public business.  How long can the Obama administration and Fed defy the law (all this information has been requested under the 'freedom of information act').   How long must we be kept in the dark.


We MUST audit the FED once a year.  What they do must see the light of day.

Jan 27, 2013 7:14PM

Just waiting for the facade that drives the accumulation of record debt that will continue to grow to split at the seams and render this nation

bankrupt. Just a matter of time at the present rate. 

Jan 25, 2013 6:13PM

Well I guess we could have went right straight into a Depression....


Most of you that mention it, or call what we have a "Depression"; More then likely have little clue of what one is or was....I only recall a few vivid stories, but the Country was much different then.


And to really know or be fully aware of it, you have be almost 85+ years old...IMO.

Growing up as a young child in the mid-late 30s, many children were shielded from some of the worst parts...So as teenager or young adult, then you might have experienced much of it..

Jan 27, 2013 1:22PM

Up early huh, MIRAGE....Yeah I agree with the audits, but we need more transparency in our Gov't.

We will probably never get it....??

About the same way we never get it out of "big Business', even public companies...

Or the Elite and Wealthy...?


We are all MUSHROOMS, in the dark and only get what it takes to keep us going...Cowshidt.



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