from the Chicago Fed
— this post authored by Thomas Haasl, Anna Paulson, and Sam Schulhofer-Wohl
Throughout the financial crisis and its aftermath from late 2008 through October 2014, the Federal Reserve used asset purchases as a potent tool of monetary policy – buying longer-term Treasury and mortgage-backed securities to provide economic stimulus beyond what traditional policy approaches could produce. Consequently, the size and composition of the Fed’s balance sheet changed significantly over this period.
As the economy returns to normal, the Fed is “normalizing” its balance sheet and the conduct of monetary policy. But what does that mean? In this Chicago Fed Letter, we discuss the Fed’s liabilities, which will play a significant role in determining the size of its balance sheet in the long run.1 We describe the basic structure of these liabilities and how they have changed in recent years. We divide liabilities into four categories based on whether they are liabilities to the U.S. Department of the Treasury, electronic liabilities to other entities, currency, or the Fed’s capital stock.
Figure 1 [above] illustrates the make-up of the Fed’s liabilities as of March 14, 2018. Together, currency and electronic liabilities account for more than 90% of the Fed’s financial obligations. The Treasury’s balance at the Fed is roughly 5% of all liabilities, and the capital stock is comparatively negligible. But the size and importance of each of these items to the Fed’s balance sheet has changed substantially over the years. We turn now to more-detailed descriptions of the underlying categories, beginning with the Treasury.
[click on image below to continue reading]
Source
http://app.frbcommunications.org/e/er?s=1064&lid=5245 &elqTrackId=9a7cedcead4046418501fa9e7428ef73 &elq=94382e568a2b43e6895f3d11516dc0f3 &elqaid=13180&elqat=1
