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The Fed’s balance sheet

Assets and liabilities of the Federal Reserve Banks

A graph is an excellent way to visualize economic data, and FRED gives you the power to construct these graphs. But some data—balance sheets, for example—convey information more clearly in table form.

Say you want to understand the Fed’s response to the current pandemic. A good place to start is the Fed’s balance sheet, which is published weekly: Table 5: Consolidated Statement of Condition of All Federal Reserve Banks.* Here, the consolidated assets and liabilities of the Federal Reserve Banks are offered in three columns: the most recent release, the previous release, and the release from a year ago. (You can also select specific releases using the calendar tool. The data below are as of September 16, 2020.)

Over the past year, the Fed’s assets have grown by about $3.2 trillion. If we inspect asset categories, we can see which are most responsible for the increase in total assets. The holdings of “U.S. Treasury securities” (purchases of notes and bonds with maturities longer than a year) grew by  $2.3 trillion, which is most of the overall increase.

An increase in assets implies a corresponding increase in liabilities. Here, we can see that currency (“Federal Reserve Notes”) has not grown much over the past year compared with other categories. Bank reserves (“Other deposits held by depository institutions”) and the “U.S. Treasury General Account” have grown significantly—about $1.5 trillion and $1.4 trillion, respectively. Of course, you could also graph these series to see how they’ve evolved. Just click on the checkbox next to each table item and select “Add to Graph”:

As we can see, since late 2008, the Fed’s purchases of U.S. Treasuries and bank reserves track each other closely. This is because the Fed buys securities from banks, which in turn have kept most of the proceedings from these sales at their account with the Fed. Recall that the Fed, as part of its response to the Financial Crisis of 2007-08, started paying interest on bank reserves in October 2008.

More recently, and especially since the current pandemic started, there is a noticeable gap between Treasury holdings and bank reserves. This gap is explained by the Treasury account at the Fed, which consists of the funds that the federal government has not yet spent. Over the past few months, the federal government has issued large amounts of new debt, some of which has been bought by the Fed with the rest absorbed by the market. However, a significant portion of the funds raised with this new debt remain unspent, as evidenced by the large size of the Treasury account. Over time, as these funds get spent, they will be transformed into currency and bank reserves.

*To reach this table, go to FRED’s homepage: Click on “Browse data by…Release.” On the releases page, scroll down to “H.4.1 Factors Affecting Reserve Balances,” which displays all the tables associated with this release, including Table 5.

Suggested by Fernando Martin.

View on FRED, series used in this post: WDTGAL, WLODLL, WSHOTSL

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