How Does the Fed Explain This $88 Billion Shift?
- Posted on November 30, 2011 at 2:31pm by
Becket Adams
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[Editor's note: at the time of this article's publication, a spokesperson for the Federal Reserve could not be reached for comment.]
As the title of this article suggests, the Federal Reserve did something last week that appears to have avoided scrutiny by major media outlets.
But it didn’t avoid detection by everyone.
According to the sharp-eyed writers at Zero Hedge, it looks as if the Fed shifted $88 billion to undisclosed recipients.
“How did that happen and how did we not hear about it?” you’re probably asking yourself. Here’s your answer: because the details are buried deep in the Fed’s accounting books.
To make sense of Zero Hedge’s findings, let’s go over the basics.
The Federal Reserve’s balance sheet, “despite its obscurity,” is fairly straightforward. Assets on the left, liabilities and equities on the right.
Anyone familiar with balance sheets understands that assets are what you have (cash, inventories, etc.) whereas liabilities are what you owe (accounts payable, accrued expenses, etc). Therefore, it was with some bewilderment that the folks at Zero Hedge noticed this:
In today’s one-day delayed issue of the Fed’s H.4.1, literally the very last number on the very last subpage in the weekly update reveals something quite disturbing . . .
Pictured above: “disturbing”
. . . the Fed’s “other” non-reserve based factors absorbing liquidity. And specifically, the actual number, which rose by an unprecedented $88 billion in one week to an all time high of $115 billion for the week ended November 23!
By all appearances, a domestic financial institution was, in the words of the Hedge, “the willing and ready recipient of an incremental $88 billion in ‘reserves’- read cold, hard cash.”
How were the deposits divvied up and who got what? We don’t know; it’s not stated on the balance sheet.
This has left many wondering what, exactly, went on behind the Fed’s closed doors.
There are a few theories. Some analysts have claimed that the $88 billion could have been moved around to fund government-sponsored entities (GSEs) such as Fannie May and Freddie Mac.
However, as far as we know, “Fannie tapped the Treasury for $7.8 billion in Q3, while the quarterly Freddie Mac injection amounted to $6.0 billion,” Zero Hedge reports.
“In other words the combined $13.8 billion cash draw need would almost explain the $88 billion weekly shift . . . if only it weren’t for the other $74.2 billion.”
Other theories posit that it was merely a “plug” to a “plug,” such as Fed capital, and that “reading too much into it may simply be an exercise in futility.”
However, just like the claim that the shift was to the benefit of GSEs, there are some problems with this explanation:
. . . if it is a plug, what it is “plugging” is an $85 billion drop in F.R. bank reserves which declined from $1.575 trillion to $1.489 trillion, an $85 billion decline.
So what are the implications?
“Is the ‘Other’ deposit merely a slush fund to convert ‘on the books’ reserves into an ‘other’ use of proceeds?” asks Zero Hedge. “In other words, the question is – just what event is it that caused the rotation of $85 billion in reserves into $88 billion in ‘Other’ liquidity absorbing factor . . .”
Before we get any further into this, let’s recap.
Here is what we know: the Fed’s “Other,” non-reserve based factors absorbing liquidity is at an all-time high of $115 billion, having just risen by $88 billion. Part of the reason that this is so disconcerting is because the Fed has not explained this jump and has simply filed it away under “Other.”
Accountants—at least on the corporate level—understand that when a liability is listed as “Other,” it can mean just about anything.
Ordinarily, entities are only put under the heading “Other” when their costs/amount is less than 5 percent of total liabilities.
The figure of $88 billion is only about 3 percent of total liabilities on the Fed’s balance sheet. Therefore, technically speaking, listing the $88 billion bump as “Other” is not unreasonable.
However, there are exceptions to the 5 percent rule. For example, if the transaction is highly unusual or subject to wide economic swings, or changing management risk estimates, it should be explained in a foot note or equivalent commentary in the financial statements. At a minimum, the $115 line item should have some type of description other than, well, “Other.”
Furthermore, “Other” should be explained if the transaction is more material as part of a subcaption. As you can see in the spreadsheet below, the major caption “Deposits” amounts to $1,646,690 and the subcaption “Other” ($115) is 7 percent of that amount and the $88 is 5.3 percent of that amount.
Click to see larger image
Therefore, good disclosure would dictate that the Fed should explain the $115 or $88, or at least have a specific caption other than “Other.”
Instead, we are left with this question: “What event is it that caused the rotation of $85 billion in reserves into $88 billion in ‘other’ . . . just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?”
Perhaps this will help. Here is the definition of “Other” by the St. Louis Fed :
“Other deposits at Federal Reserve Banks include balances of international and multilateral organizations . . . such as the International Monetary Fund, United Nations, International Bank for Reconstruction and Development (World Bank); the special checking account of the ESF [European Social Fund] . . . and balances of a few U.S. government agencies, such as the Fannie Mae and Freddie Mac.”
Just to be clear, among the GSEs that are eligible for an “Other” transfusion, Fannie got $7.8 billion and Freddie got $6 billion. Where did the other $74.2 billion of the $88 billion go?
It might be important to note that entities such as the “IMF, the UN, the World Bank and . . . the ESF [European Social Fund] are all part of the ‘other’ reserve ‘use of funds’ destination” and they are desperately in need of cash.
“In other words,“ writes Zero Hedge ”. . . it sure wasn’t only (if at all) the GSEs, [that] had a massive capital shortfall and had to resort to Fed deposits. And by the looks of things, these could have easily been ‘international’ entities tasked with bailing out the world such as the IMF.”
The bottom line is this: it is unclear whether the IMF or ECB received Fed deposits and it is unclear which–if any–of the GSEs got it.
That being said, does it really come as a surprise to politicians in D.C. that there is so little trust in government institutions?
The jump certainly makes one wonder (Source: Zero Hedge)
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Comments (78)
spreadcommonsensenot pc
Posted on December 1, 2011 at 10:03amWhaaaa did the fed hire CORZINE? or something…………….slight of hand
Report Post »wildwood
Posted on December 1, 2011 at 9:52amTHE VERY reason the feds should be audited!!!!!!!!! Taxpayer are being fleeced every day!!!!!!
Report Post »If we do not stand up and yell we have had enough, it will continue,If we would stick together bombard Obama and our congress with letters, e-mails, phone call, they would have to do something!!!
Bill in Texas
Posted on December 1, 2011 at 11:57amCan’t they file a FOI request on that line item? I bet it went to funding Obummers reelection campaign. lol
Report Post »SgtB
Posted on December 1, 2011 at 3:46pmI’ve never understood how we…
Need a dollar,
gov’t borrows a dollar on our behalf from the fed,
fed says okay, prints said dollar for $0.10, charges the gov’t $1.00 plus interest,
gov’t thinks this is fair and passes the dollar on to the public at a 9X markup plus interest. Exactly how does that work? Also, how is it that the IMF has enough cash reserves to bail out nations? Exactly how does someone acquire that much capital?
Report Post »bigbear_awake
Posted on December 1, 2011 at 5:30pmin the bunker under white house
Report Post »argvan1823
Posted on December 1, 2011 at 6:37pmBILL IN TEXAS…since The Fed is a private organization it is not subject to Freedom Of Information requests.
Report Post »jb.kibs
Posted on December 1, 2011 at 8:15pmEnd……
The Fed.
Report Post »babylonvi
Posted on December 1, 2011 at 11:34pmRemember Bill, FOIA only works against the government. The Federal Reserve is private.
Report Post »mastice
Posted on December 1, 2011 at 9:47amThat’s how much money Obama decided to donate to the OWS crowd for next spring.
Report Post »Mil Mom
Posted on December 1, 2011 at 9:05pmI don’t read anyone mentioning the fact the largest market gain in recent history was attributed to the fact that efforts were taken to give EU banks easier access to American dollars! $88 bil sounds like a little easier access to me!
Report Post »Delta_River_Folk
Posted on December 1, 2011 at 9:12amEach year, Washington D.C. takes money from every state then divides it up among the states, and hands it back out. Some states end up with a net loss (pay in more than they receive back) while others have net gain (get more back than they pay in). Using public references (if you trust them) one can calculate winners and losers. All values listed are in the BILLIONS.
In 2005, the top five losers: New York $54, New Jersey $43, Illinois $38, Minnesota $36 and California $23
In 2005, the top five winners: Virginia $41, Alabama $22, Maryland $20, District of Columbia (DOC) $20 and Florida $19
In 2007, the top five losers: New York $87, New Jersey $58, Texas $54, California $54 and Illinois $47
In 2007, the top five winners: Virginia $48, Alabama $24, DOC $23, Mississippi $20 and Maryland $17
In 2008, the top five losers: New York $56, New Jersey $50, Minnesota $43, Illinois $34 and Texas $26
In 2008, the top five winners: Virginia $52, DOC $28, Kentucky $27, Maryland $24 and Alabama $23
Year 2009 not many losers
In 2009, the top five winners: Virginia $97, California $81, Florida $66, Maryland $48 and Michigan $36
Why are Virginia, District of Columbia (DOC), and Maryland always winners? Who spends >80% their time in these 3 areas? On your own, take a look at which counties in Virginia and Maryland received the most federal dollars. You probably won’t be surprised.
OUR CURRENT SYSTEM IS BROKE. Repel 16th and 17th Amendments!!!!
Report Post »Walkabout
Posted on December 1, 2011 at 11:47amIt makes sense for some state to get more money than other states at times. But it should be a temporary situation such as building up infrastructure in a region before moving on to another state or region.
If a state continually receives more than tax receipts, the pols are pandering to the people (political spoils system) or the state is run by Morons.
Report Post »135AJS
Posted on December 1, 2011 at 9:08amZero Hedge the other side of the GSE is HUD or FHFA and since FHFA has not payed out the insurance premiums on the losses incurred by the lending institutions and since FHFA is under cap
Report Post »and unable to raise the need funds through increases in premiums and volume in sale of Short-Sale or Foreclosed homes to new buyers could it be possible that the Fed is hiding the 88 Billion to be paid so as not to make it clear how poorly and incompetent the Goverment agencies are and it would prove that they don’t belong in the Home lending industry……Could some please respond???
turkey13
Posted on December 1, 2011 at 9:23amOh gosh – it looks like Timmy is using Tturbo Tax as an accounting tool!
Report Post »4X4in
Posted on December 1, 2011 at 9:05amRelaxe, I figured it out!
Report Post »Another vacation for the Obammmaaa’s…….
Heil88
Posted on December 1, 2011 at 8:42amThe FED’s are liar’s thieves and crooks they are stealing are money and giving it away! DOWN with the FED support the congress and the constitution, but DOWN with the FED enough is enough. You’re absolutely right the money most likely has made its way to help postpone fall and the bailout of the EU. We need to impeach and then elect officials based of Character, Merit, Honor not wealth corruption and lies. We are to blame!
Report Post »lobster
Posted on December 1, 2011 at 9:04amHow about those “Bearer bonds ” those Japanese guys were carrying into Switzerland a couple of years ago? How in the world could $500+ million notes be forged? I think you have to some originals in order to copy, i.e. birth certificate.
Report Post »sgtstubbs
Posted on December 5, 2011 at 6:50pmWe are the world,,,we have given China money they buy our Debt this is called Bonds. We give Germany money then they buy our Fighters which parts of them are made in China. We buy dog food from China and they kill our dogs. I tried to “Buy American” but the only things on the list was food and tee shirts. I also noted that alot of candy is being made in Mex….scary.
Report Post »Outlaw_Josey_Wales
Posted on December 1, 2011 at 8:11amI think the $88 billion went to the IMF “International Monetary Fund” to bail out europe!
Report Post »V-MAN MACE
Posted on December 1, 2011 at 8:37amThey‘re simply embezzling and robbing us for everything that isn’t pinned down, and then they’re coming back with the claw hammers to get the rest.
Nothing new here, they gave the banks and other undisclosed entities over 27 TRILLION that still has yet to be seen.
Abolish these criminals. This is Financial Jim Crow action.
I can’t get a loan of a few billion for .01%… why the hell can they when they’re so insolvent… I’m more solvent than they are, I still have some labor to sell… they have nothing and are worth nothing… they have no reserves and don’t plan on doing any labor… all they do is print money and cook the books with computers…
Report Post »Amazingoly
Posted on December 1, 2011 at 7:31amCalling Darrell Issa and his crew! This needs an investigation for sure.
Report Post »Mil Mom
Posted on December 1, 2011 at 9:18pmIssa will have to hire gazillions of help just to get all the investigations finished by the turn of the next century. Meantime, their planning on taking down our country by 2025.
Report Post »thekuligs
Posted on December 1, 2011 at 7:13amI‘d say it’s highly likely the money is now in Europe. I believe the Fed just made it easier to “borrow” American dollars, and that was one of the reasons our own stock market rebounded so well this week–because we are going to help save Italy, and whoever else fails next! Which is funny because we can’t even save ourselves! It’s kind of like loaning your grocery money to cazy uncle Bernie, when you know he won’t be able to pay you back AND giving him a tear one intrest rate.
Oh, he’s good for it!
Report Post »Mil Mom
Posted on December 1, 2011 at 9:22pmKinda like lining all your dominoes in a circle so they can hold each other up, ISN’T IT? DON’T ANYBODY MOVE OR BREATH!
Report Post »Bill Rowland
Posted on December 1, 2011 at 6:37amThis super secret organization should be subject to a audit. Then it should become part of the Treasury Department. The Treasury Department was established to control the governments money not a bank that answers to no one.
OMG
Report Post »Meyvn
Posted on December 1, 2011 at 7:13amI think they should be subject to more than just an audit.
And so does this guy: http://indianapost113.com/wp-content/audio/SoldierSpeaksOut.mp3
Report Post »Rowgue
Posted on December 1, 2011 at 12:30pmIt shouldn’t be made part of the treasury department, they should just repeal the federal reserve act and abolish it.
It‘s a ridiculous organization and a ridiculous concept on it’s face. They created an entity that isn‘t subject to any oversight because it’s not technically part of the government that has the power to artificially and arbitrarily manipulate our currency and interest rates at their whim.
Report Post »rcguy
Posted on December 1, 2011 at 5:35amGoogle and read about the Rothschild family, a European family of German Jewish origin that established European banking and finance in the late 18th century and how our Founder Fathers got involved. Today it is called the Federal Reserve.
Report Post »rcguy
Posted on December 1, 2011 at 5:37amAnd please don’t call me a racist.
Report Post »jaxy
Posted on December 1, 2011 at 6:33amYeah it’s all the Jews fault, what an idiot, and yes it is definitely racist to use someone’s racial background as one of the main factors for hating them. You can tell your conscience whatever you like.
Report Post »rcguy
Posted on December 1, 2011 at 7:06amJaxy, I didn’t write history. Your handle should be jackass.
Report Post »hogtrashhd
Posted on December 1, 2011 at 3:55amit’s really quite simple.. the president and his “friends” are robbing the US blind.. they know he’s not going to get another term.. hell he will probably throw in the towel at a very early stage and not even pretend to run.. actually he seems to have done that already.. obama is going to go a different route and try to be the leader of the world.. screw the US as he has said in so many words.. he‘s way above us don’tcha know.. he’s a very transparent dude.. why do so many seem befuddled?? are we just a bunch of bumblebums as it seems.. I think so.. reality isn’t a tv show.. it’s way more mundane.. it’s all about the benjamins.. follow the money nitwits..
Report Post »positive1
Posted on December 1, 2011 at 2:02am$88 billion bet on a 480 point stock market, Insider trading? I’ve heard of “Magic Chef”, maybe now there’s the “Magic Fed”, this would make a great skit for Brian Sac
Report Post »Old Truckers
Posted on December 1, 2011 at 1:44amNone of this matters anymore. Its too late.
Report Post »Europe, USA, and really the entire world is melting down, and we all see it.
We know it is a huge failure, this experiment in self determination. Is it time to repent and look to God instead of some man-ruler?
Liberate
Posted on December 1, 2011 at 12:16pmYou call this self determination. There has not truly been any form of real self determination since the dust bowl days. Even then it really was back to the time of Lincoln. In one form or fashion, the Politicians of what ever ilk has foisted a ruse on us for our own good and asked us to Trust them.
Self Determination or Republican forms of Government require the People to participate. Not just a few but all the masses.
When the country went off of the Gold Standard and Used Precedence in court matters to determine legal decisions vs using the Constitution. That was when the vast majority of these problems originated.
Your Self Determination was long gone before you were born.
Report Post »ArmyDad14J
Posted on December 1, 2011 at 1:21amI just don’t know anymore. Things are coming apart faster than we will ever know. I truly am scared. Most people I know look at the world with rose colored glasses. What happens to what I served to protect? What happens to what my son is currently serving to protect? What happens to a daughter that starts college next fall? Piece of the puzzle? I haven’t been given mine yet.
Report Post »UrbanCombatSurvivor
Posted on December 1, 2011 at 3:39amWhat happens is you prepare, and be ready so that we can rebuild if it all falls apart. We can make a few, tiny additions to the Bill of Rights that will make it exponentially more difficult to infiltrate and destroy our system next time. Three one paragraph amendments would fix their loopholes…
Report Post »Meyvn
Posted on December 1, 2011 at 7:47am@UrbanCombatSurvivor: Prepare I am. But what makes you think there’s going to be a next time?
Report Post »chazmo
Posted on December 1, 2011 at 1:18amI wrote: you mean European Bands..
Report Post »You know the Stones, Beatles, etc… doh… ugh.. ok bands=banks.. but, you are smart people i’m sure you figured it out..
GeneTracy
Posted on December 1, 2011 at 8:31amGood one.Nice catch.Two really great bands!The banks?Not so much.
Report Post »mrsalvage2
Posted on December 1, 2011 at 12:38amOMGosh!
I just realized!
The FED controls EVERYTHING!
Phone the kids! Wake the neighbors!
Oh I have to rest, I cannot endure this any longer. But we certainly cannot talk about the single person who wants to get into Office to address and solve this problem fo the FED by returning to the Constitution. Nope, cannot talk about it.
Engage Kool-Aid
Report Post »abbygirl1994
Posted on December 1, 2011 at 12:32amIts time to stop this madness and hang these twits on the gallows………… hello GOP what are you doing.. are you doing anything at all?? Its time to arrest all of these idiots for treason, corruption and theft.. etc etc etc… God help us!
Report Post »paperpushermj
Posted on December 1, 2011 at 12:28amCan’t prove it but my guess is the money went to Europe
Report Post »chazmo
Posted on December 1, 2011 at 1:13amyou mean European Bands.. It’s no wonder the markets soared the last 2 days.. bunch of shiz… 2nd look at Ron Paul anyone?
Report Post »thekuligs
Posted on December 1, 2011 at 7:15amOf course it did, the Fed just made it easier to “borrow” American dollars, the stocks reacted because we are going to save Italy UGH
Report Post »recoveringneocon
Posted on December 1, 2011 at 12:26amHow Does the Fed Explain This $88 Billion Shift?
Report Post »If you really want an answer, it is easy.
Ron Paul
KangarooJack
Posted on December 1, 2011 at 12:19amReally it’s not hard to trace. Just look at how the FED is furiously printing money as I type???
Then recall the last EURO Summit Meeting….
WE have trillions upon trillions of dollars….and not a gold brick at Fort Knox! lol
Venuezelva has it all….snicker snicker
Report Post »AnAmerican111
Posted on November 30, 2011 at 11:53pm$88 Billion to OBUMA’s re-election campaign!
Let’s face it! The embarrassment of having a liar and a thief as a President named OBUMA may destroy this Country before we can get rid of the criminal.
Report Post »BloodSweatandTears
Posted on November 30, 2011 at 11:48pm88 billion? This one’s easy…Barney Frank’s retirement account.
Report Post »Mil Mom
Posted on December 1, 2011 at 9:32pmMaybe it was his EARLY RETIREMENT BUYOUT PACKAGE!
Report Post »AxelPhantom
Posted on November 30, 2011 at 11:47pmIt almost makes you afraid to audit the FED lest some European zombie jumps out of a file cabinet and bites you. “Dawn of the Living FED”
Report Post »Modawg734Blue
Posted on December 1, 2011 at 12:16amI Like that, Maybe you could turn it into a movie.
Report Post »carrieval
Posted on December 1, 2011 at 2:01amLove it!! Make a movie!
Report Post »Meyvn
Posted on December 1, 2011 at 7:49amYeah. It needs to be a movie.
Report Post »V-MAN MACE
Posted on December 1, 2011 at 8:39amTry this animated movie about the Fed. It’s very informative in an entertaining way, yet dumbed down enough for the fluoride head masses to understand. And it isn’t long and boring.
http://www.youtube.com/watch?v=zXjoAP7jm6Y
Report Post »Mil Mom
Posted on December 1, 2011 at 10:09pm@V-MAN MACE
Report Post »Posted on December 1, 2011 at 8:39am
Try this animated movie about the Fed. It’s very informative in an entertaining way, yet dumbed down enough for the fluoride head masses to understand. And it isn’t long and boring
***
“dumbed down enough…..
Is Homer simpson busy, maybe his daughter Lisa can set him down & try to explain it while Bart robs his checkbook, and the baby sucks happily at the lollypops he gives her! Momma’s too busy getting her hair done to be bothered with any of it!
Rowgue
Posted on December 1, 2011 at 12:19pmYou can leverage yourself to be less succeptible to the fluctuations of the overall economy, but you can never escape it entirely. No matter where you live you have to pay property taxes, and the government isn’t bartering with you.
Report Post »Is you is o is you aint mah constituency
Posted on December 1, 2011 at 5:49pm@Floridacracker God bless you and your wife for your rugged individualism. Best of luck.
Report Post »