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Federal Reserve Board of Governors

Credit and Liquidity Programs and the Balance Sheet

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The Federal Reserve's balance sheet

The Federal Reserve operates with a sizable balance sheet that includes a large number of distinct assets and liabilities. The Federal Reserve's balance sheet contains a great deal of information about the scale and scope of its operations. For decades, market participants have closely studied the evolution of the Federal Reserve's balance sheet to understand more clearly important details concerning the implementation of monetary policy. Over recent months, the development and implementation of a number of new lending facilities to address the financial crisis have both increased complexity of the Federal Reserve's balance sheet and has led to increased public interest in it.

Each week, the Federal Reserve publishes its balance sheet, typically on Thursday afternoon around 4:30 p.m. The balance sheet is included in the Federal Reserve's H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks," available on this website. The various tables in the statistical release are described below, an explanation of the important elements in each table is given, and a link to each table in the current release is provided.

Table 1. Factors Affecting Reserve Balances of Depository Institutions

Table 1 of the release covers two pages and presents details on the factors that supply and absorb reserve balances, as well as the level of reserve balances--that is, funds that depository institutions hold on deposit at the Federal Reserve to satisfy reserve requirements and funds held in excess of requirements. Table 1 is not a balance sheet, but it is derived primarily from components of the Federal Reserve's balance sheet. In addition, certain items from the Treasury's balance sheet that affect the supply of reserve balances are included. Table 9, discussed below, contains the Federal Reserve's balance sheet.

Historically, the level of reserve balances was important to understand the effects of open market operations. In current circumstances, table 1 is of interest because it presents a detailed breakout of the assets held by the Federal Reserve. These assets include: holdings of Treasury, agency, and mortgage-backed securities; discount window lending; lending to other institutions; assets of limited liability companies (LLCs) that have been consolidated onto the Federal Reserve's balance sheet, and foreign currency holdings associated with reciprocal currency arrangements with other central banks (foreign central bank liquidity swaps).

Table 1A. Memorandum Items

Table 1A presents selected items that do not directly affect the Federal Reserve's assets and liabilities but are related to important roles that the Federal Reserve plays. The Federal Reserve Bank of New York acts as a custodian in holding securities on behalf of foreign official and international institutions. Market participants often look for trends in these data to gauge foreign demand for U.S. Treasury and agency securities. This table also presents information on the securities lent by the Federal Reserve under its securities lending programs. As noted in more detail in Lending to primary dealers, the Federal Reserve lends securities from its portfolio of Treasury securities to foster efficient and liquid trading in the government securities market. When securities are lent, they continue to be listed as assets of the Federal Reserve because the Federal Reserve retains ownership of the securities.

Table 2. Maturity Distribution of Term Auction Credit, Other Loans, and Securities

Table 2 presents the maturity of securities holdings and loans extended, and it fulfills the Federal Reserve's statutory requirement to publish the maturity of the assets it holds. Moreover the table presents, where practicable, the maturity of the assets held by LLCs that have been consolidated onto the Federal Reserve's books (see below).

Tables 3 through 8

Tables 3 through 8 provide supplementary information related to items on the Federal Reserve's balance sheet. Table 3 provides extra information about the mortgage-backed securities purchase program. Tables 4 through 8 present information on the various LLCs that the Federal Reserve has created: Maiden Lane LLC, Maiden Lane II LLC, Maiden Lane III LLC, Commercial Paper Funding Facility LLC, and the LLCs funded through the Money Market Investor Funding Facility. Under the structure of these LLCs, the Federal Reserve Bank of New York (FRBNY) is the sole or primary beneficiary of the LLCs. As a result, consistent with generally accepted accounting principles, the assets and liabilities of these LLCs are consolidated with the assets and liabilities of the FRBNY, and with this consolidation, the extensions of credit from the FRBNY to these LLCs are eliminated from the balance sheet.

Table 9. Consolidated Statement of Condition of All Federal Reserve Banks

Table 9 presents the balance sheet of the Federal Reserve System. The first page of table 9 presents the assets held by the Federal Reserve. The assets listed largely parallel the factors supplying reserve balances from table 1. The second page presents the liabilities of the Federal Reserve. Federal Reserve notes--that is, U.S. currency--is the first liability listed and has historically been the largest liability. Depository institutions maintain balances on deposit with the Federal Reserve, and these balances are reported in deposits of depository institutions. Two accounts of the U.S. Treasury are also presented: the Treasury general account, from which the Treasury makes most of its payments, and the Supplementary Financing Account, where the proceeds of debt issued under the Supplementary Financing Program are deposited.

Also on the second page are the capital accounts of the Federal Reserve. Each member bank of the Federal Reserve is required, by law, to subscribe to shares of its local Reserve Bank in an amount equal to 6 percent of its own paid-in capital and surplus. The member bank receives a statutory 6 percent dividend on these shares from the Reserve Bank. Of the capital requirement for member banks, half must be paid to the Federal Reserve and half remains subject to call by the Board of Governors. After expenses are paid, Reserve Banks are required by law to pay net earnings into surplus so that surplus equals the amount of capital paid in. Earnings by the Reserve Banks in excess of the amount needed to equate surplus with capital paid in are remitted to the Treasury. The weekly payment to the Treasury is therefore affected by changes in the value of the Federal Reserve's assets and liabilities, including those associated with the new lending facilities. The Federal Reserve's Annual Report presents the annual payment to the Treasury as “Payments to U.S. Treasury (interest on Federal Reserve notes)." Statistical table 10 in that report provides the payment by Federal Reserve Bank, and table 11 presents historical data on the payment.

Table 10. Statement of Condition of Each Federal Reserve Bank

Table 10 provides the same information as table 9, but incorporates data for each Federal Reserve Bank. The interdistrict settlement account reflects the netting of transactions between Reserve Banks and transactions that involve depository institution accounts held by other Reserve Banks, such as Fedwire funds, check, and ACH transactions. Of note, the assets of the consolidated LLCs mentioned above are assets solely of the Federal Reserve Bank of New York. In addition, securities held in the System Open Market Account are allocated across Reserve Banks, roughly in proportion to the capital paid in of each Reserve Bank.

Table 11. Collateral Held against Federal Reserve Notes: Federal Reserve Agents' Accounts

Table 11 provides information on the assets that serve as collateral for Federal Reserve notes. All Federal Reserve notes in circulation--that is not in Reserve Bank vaults--must be collateralized by assets of the Federal Reserve.

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Last update: April 2, 2009