The NY Fed Would Like You To Know it is Packed With Tools

I mean REALLY, NY Fed, thank you for at making my job that much easier. It's like I don't even have to write.

New York Fed Tunes Up a Cash Management Tool (NYT) [and here I thought they had a shit ton of tools already, like this ex-Goldman winner]:

The Federal Reserve Bank of New York said on Monday it had been working on a market tool it could use to withdraw cash from the banking system but stressed that it was not about to use it.

The New York Fed, which is the operational arm of the nation’s central bank, said it had been working during the last year to ensure that “this tool will be ready when and if” the policy-setting Federal Open Market Committee decides to use it.

Monetary policy makers have said that the tool — reverse repurchase agreements, also known as reverse repos — could be one way to drain excess reserves when the time comes to reduce the amount of credit that the central bank has provided to the banking system to avert the risk of inflation.

“This work is a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary policy tightening,” the New York Fed said.

The operational arm, Christ NYT, you make it sound so seedy, like NY Fed is in there manipulating markets and pissing in the sandbox.


In a reverse repurchase agreement, the Fed sells assets like Treasuries for cash with an agreement to buy them back later at a higher price, thus removing cash from the system.

Who might want a bunch of shitty Treasuries? Assets are assets, I suppose, but wouldn't the Fed cripple its balance sheet a tad if it were to wobble too far on the liabilities side? Maybe Fed accounting allows for assets sold to banks that are the Fed anyway (yes, JP Morgan) to count as assets on both buyer and seller balance sheet, who the hell knows?

The consequences of the Fed's current position, if left untouched, are undeniable.

Are these NY Fed's Treasuries?

The Fed balance sheet has a curious footnote for Other loans:

1. Excludes the loans from the Federal Reserve Bank of New York (FRBNY) to Commercial Paper Funding Facility LLC, the LLCs funded through the Money Market Investor Funding Facility, Maiden Lane LLC, Maiden Lane II LLC, and Maiden Lane III LLC. The loans were eliminated when preparing the FRBNY's statement of condition consistent with consolidation under generally accepted accounting principles.

Aha. So NY doesn't count Bear as a "liability". So whose liability is that? Because it's a little fucking large for just a footnote, FRBNY.

4. Information on Principal Accounts of Maiden Lane LLC
Millions of dollars
Account name Oct 14, 2009

Net portfolio holdings of Maiden Lane LLC (1) 26,361

Outstanding principal amount of loan extended by the Federal Reserve Bank of New York (2) 28,820
Accrued interest payable to the Federal Reserve Bank of New York (2) 382
Outstanding principal amount and accrued interest on loan payable to JPMorgan Chase & Co. (3) 1,235

1. Fair value. Fair value reflects an estimate of the price that would be received upon selling an asset if the transaction were to be conducted in an orderly market on the measurement date. Revalued quarterly.
This table reflects valuations as of June 30, 2009. Any assets purchased after this valuation date
are initially recorded at cost until their estimated fair value as of the purchase date becomes available.
2. Book value. This amount was eliminated when preparing the Federal Reserve Bank of New York's statement of condition consistent with consolidation under generally accepted accounting principles. Refer to the note on consolidation accompanying table 10.
3. Book value. The fair value of these obligations is included in other liabilities and capital in table 1 and in other liabilities and accrued dividends in table 9 and table 10.

Note: On June 26, 2008, the Federal Reserve Bank of New York (FRBNY) extended credit to Maiden Lane LLC under the authority of section 13(3) of the Federal Reserve Act. This limited liability company was formed to acquire certain assets of Bear Stearns and to manage those assets through time to maximize repayment of the credit extended and to minimize disruption to financial markets. Payments by Maiden Lane LLC from the proceeds of the net portfolio holdings will be made in the following order: operating expenses of the LLC, principal due to the FRBNY, interest due to the FRBNY, principal due to JPMorgan Chase & Co., and interest due to JPMorgan Chase & Co. Any remaining funds will be paid to the FRBNY.

So if they are NY's Treasuries, who gives a shit?

Anyway, uh what are we paying JP Morgan for? Thanks. P.s. I heard Goldman Sachs calculates fair value daily, you sloppy FRBNY bitches. Get it together.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


Bill said...

Adrniene -
Watch out for the distract / detract phenomena. The real scare with the "new tool" is that the Fed will drain CASH from the nations money markets in exchange for whatever they chose , most likely MBS on their books (1.2 to 2.2 trillion worth) . Then whom holds the worthless bag of s... !? If the masses had brains we would be seeing a run on money markets today as we saw a year ago, when this whole mess became apparent. Feds long boney fingers never stop stealing . Grandma is last to be robbed . Moneymarkets!! better to have cash in a mattress.

LossAngeles said...

Excellent post with details on how the Fed robs us all. My fav was the FN that it owes 1.2 billion to JP Morgan Chase. It all makes me sick to my stomach.


Don't bring up Grandma. Mine is still getting a 1% return on her CDs and it's pissing me the fuck off. And yes, until the masses GROW a brain, the shenanigans will continue. That's who the show is for...


Can you explain that madness to me? How the fuck does JP Morgan get paid out of this ?! I am fucking confused. Or maybe I need to smoke more crack and it will suddenly become clear to me.