The Federal Reserve System Balance Sheet: What Happened and Why it Matters
IMF Working Papers, May 1, 2009
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- The Federal Reserve System Balance Sheet: What Happened and Why it Matters
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Bibliographic details
- Authors: Peter Stella
- Published: May 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451872675.001
Summary and central findings
- The recent expansion of the balance sheet of the consolidated Federal Reserve Banks (FRB) is analyzed in an historical context.
- The nature of Fed involvement in U.S. financial markets has changed dramatically.
- The expansion is described as "several orders of magnitude beyond what is usually reported."
- Associated fiscal risks and potential exit strategies are considered.
Fiscal risks, scenarios, and implications
- Risks are considerable in certain unlikely scenarios.
- Despite those risks, "FRB capital, earnings capacity, and reserves are more than ample to preserve their financial independence."
- However, the occurrence of losses or a significant drop in FRB profit might lead to an eventual curtailment of Fed operational independence.
Policy considerations and recommended actions
- Consider options to enhance FRB risk management.
- Consider how to assign responsibilities for monetary policy, financial stability, and fiscal policies once the current crisis is overcome.
- Analyze potential exit strategies from the enlarged balance sheet and their fiscal implications.
Research scope and topical coverage
- Subject areas: Banking, Commercial banks, Credit, Currencies, Financial statements
- Keywords: FRB balance sheet, FRB capital, FRB equity, monetary policy, U.S. dollar, WP
Source: Peter Stella, "The Federal Reserve System Balance Sheet: What Happened and Why it Matters", IMF Working Papers, May 1, 2009.
Content in this bundle
- 26. Federal Reserve Policy Assets