Bailout Report

In an effort to increase transparency about the $1 Trillion (of $2.1 Trillion) it has added to it’s balance sheet since last September, the Fed committed to issuing a balance sheet performance report on the second Wednesday of each month.

In the first reports, the Fed indicated it netted $2.7 Billion in the first quarter, largely on gains from Term Auction Facility (TAF) loans and on its Commercial Paper Funding Facility; earned $4.6 Billion from Treasury bonds which it started purchashing in March; and lost $5.3 Billion on Bear Stearns and AIG collateral.

Federal Reserve Credit and Liquidity Programs and the Balance Sheet
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Ben Bernacke’s must have been to Blockbuster this weekend to catch up on his classic American cinema.

First AIG received $85 Billion in September. That later swelled to more than $150 billion earlier this month.

Then Citigroup received $25 Billion in cash from the TARP last month. Now, the bank has received another $20 Billion and a guarantee on $306 billion of debt.

And yesterday the Federal Reserve commits to the outright buying of, for the first time ever, $600 Billion worth of mortgages and consumer loans from bank and GSE balance sheets.

We witness the shift of yet another multi-hundred billion dollar run from US printing presses to the country’s largest mismanaged banks with no assurance more will not be needed to accomplish the stated goal of avoiding another Lehman-sized bankruptcy. After being outfitted by Congress in the light of day to a $700 Billion lifeboat, these continued allocations of capital by the Fed far over and above this amount leaves us in awe of the Fed’s willingness to back more large rescue plans, but not knowing for certain if another major bank will need to be bailed out.

And leaves open the question of whether brilliant Ben Bernacke will do to the US Dollar what Stephen Spielberg’s mechanical fish did to man-of-the-people Captain Quinn:

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