Nerdy thought on the Fed balance sheet

September 3, 2009

Looking quickly at the Fed balance sheet, I stumbled upon the “off balance sheet” quirk of its mortgage-backed security holdings. The Fed reports this week that its holdings through Wednesday Sept. 2 stand at $625 billion. But we know from the NY Fed data released yesterday that the central bank has bought $817.6 billion MBS so far this year.

The discrepancy, which I had forgotten but a kind source reminded me of, is because the Fed is buying mortgage pass-throughs before they settle, those purchases won’t show up right away. Here is the table that shows there are $164.7 billion MBS essentially off balance sheet. So there’s still a whole lot more coming onto the Fed’s balance sheet, even if they stopped purchasing MBS tomorrow.

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