Posted on June - 30 - 2011
LSAP Ends, but Balance Sheet Scrutiny will Continue
Federal Reserve Balance Sheet
LSAP Ends, but Balance Sheet Scrutiny will Continue
Today marks the end of the Fed’s Large Scale Asset Purchases (LSAP) plan that targeted purchases of $600bn in government securities. Since the announcement in November, the Fed balance sheet has undergone a significant facelift. At the close of LSAP, the Fed holds $911bn in mortgage-backed securities (MBS), $12.9bn in TALF loans, and $118bn in agency securities. However, these crisisrelated holdings have declined for 31 consecutive weeks (WoW) and the balance sheet has shifted to government securities, which increased $759bn or 89% since 10 November. Recent statements by the Fed imply continued reinvestment of retiring principal. Previous Federal Reserve minutes also unveiled discussion of an eventual aim for an all-government securities balance sheet, a feat that the Fed is gradually achieving, although the absolute size of the balance sheet remains an obstacle. Excess reserves took a breather from their recent high growth rates of the past few months and declined by $42bn.
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