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Posted on 01/22/2011 7:58:37 AM PST by FromLori
Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.
The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.
But the new rules have slowly begun to catch the attention of market analysts. Many are at once surprised that the Fed can set its own guidelines, and also relieved that the remote but dangerous possibility that the world's most powerful central bank might need to ask the U.S. Treasury or its member banks for money is now more likely to be averted.
"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."
(Excerpt) Read more at cnbc.com ...
Is this simply one more accounting trick to hide their termites?
What’s the story on this, From? It looks like they found a way to take on even greater liabilities.
Don’t these brain dead idiots understand that technically, this is a reality simply because the Dollar is still the Reserve currency for the World monetary system?
The Fed understands this and is abusing, pushing their luck, until the World decides to adopt a new form of Reserve Currency. When this finally happens, the result will be runaway hyper inflation, a complete failure of the Banks and the industrial economy.
The ONLY thing keeping the International interests from doing this now, is that if the USA goes under, they will also. Which is why they are now building up their economies and stock piling precious metals to prepare for just that.
ZeroHedge gives a really good explanation below this seems politically motivated so the liberals can spend more.
snippet
“Which only means that the Fed’s now ridiculous DV01 of just under $2 billion will in no way prevent the world’s biggest hedge fund from taking proactive steps to actually mitigate rate risk, and in fact will likely encourage it to gamble even more with taxpayer capital..”
http://www.zerohedge.com/article/accounting-gimmick-makes-fed-insolvency-impossible
Thanks - I figured as much.
Just a thought....Enron cooked their books too.
Fed Buys $20 Billion More This Week: That’s $320 Billion In Treasury Debt Monetization Since August - And Counting
http://www.marketwatch.com/story/fed-buys-836-bln-in-bonds-treasurys-resume-gain-2011-01-21
http://www.marketwatch.com/story/bonds-yields-edge-up-before-fed-buyback-2011-01-19
Not So Well Known - Tracking The Fed’s OTHER Criminal Debt Monetization Program
“The program in question isn’t talked about frequently. It is a completely separate criminal approach to monetizing the national debt through Treasury purchases.”
Fed Officials Diverge on Plans to Reinvest Giant $2trn MBS Portfolio
Background reading
http://www.ny.frb.org/markets/agency_agencymbs_faq.html
http://www.reuters.com/article/idUSN0814538420101208
Alternate Treasury Purchases Increase by Fed
more title and link only due to copyright
Fed Buys $7.229 Billion of Treasuries as Easing Resumes
http://www.bloomberg.com/news/2010-11-12/fed-buys-7-229-billion-of-treasuries-as-easing-resumes.html
“”The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.
This enhances transparency by providing clearer, more frequent, snapshots of the central bank’s finances, analysts say. The bonus: the number can now turn negative without affecting the central bank’s underlying financial condition.””
______
It is becoming a Brave New World where the government makes something more obscure but says that it enhances transparency.
What planet do these people live on? Alice in Wonderland would be right at home here:
"We're all mad here." -Cheshire Cat
“It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!”-The Red Queen
“When I use a word, it means what I choose it to mean, neither more nor less.”-Humpty Dumpty
Right,
And the Titanic was “Unsinkable”. And what the Fed has recently been doing is a guarantee that it will become insolvent.
“It is becoming a Brave New World where the government makes something more obscure but says that it enhances transparency.”
Well said this has become a well used tactic they try to change the facts by (propaganda)changing the dialogue. Fits right in with obama pushing new spending.
Accounting tweaks don’t change anything in the real world. They are going to hell just as fast. They are just writing about it more optimistically.
NO MORE LIMITS on spending; Free pie for everyone!
lol I kind of viewed it like that why not just give free money to everyone then I realized only the elite get the pie we just get to pay for it.
From the comments..
“Negative interest owed to Treasury” means losses owed to FED by Joe Taxpayer. Thank you Hanky Panky Bernanke!”
Is this the accounting equivalent of converting from Fahrenheit to Celsius, and then declaring that global warming is over because it only got to 45° today?
thanks
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