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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: prometheus1976 who wrote (57774)	11/12/2009 6:48:21 AM
From: TobagoJack	1 Recommendation Respond to of 218037

just in in-tray “Intent to deceive” is too good a title to pass up. A friend (client) and I were discussing the Fed and its capital base given how big its balance sheet has become. Since the central banks are keen to reduce the leverage in the banking system how does the Fed (a private company remember) compare? From the FRBNY annual report the Fed has $11bn in equity. This supports $1.2 trillion in assets, a cool 100+ to 1. In Maiden Lane alone it has $75bn in Level Three assets. But fear not ye of little faith because (from the FRBNY 2008 report): Differences exist between the accounting principles and practices in the FAM and generally accepted accounting principles in the United States (“GAAP”), primarily due to the unique nature of the Bank’s powers and responsibilities as part of the nation’s central bank. The primary difference is the presentation of all SOMA securities holdings at amortized cost, rather than using the fair value presentation as required by GAAP. U.S. government, and federal agency, and GSE securities and investments denominated in foreign currencies comprising the SOMA are recorded at cost, on a settlement-date basis, and are adjusted for amortization of premiums or accretion of discounts on a straight-line basis. Amortized cost more appropriately reflects the Bank’s securities holdings, given the System’s unique responsibility to conduct monetary policy. Although application of fair value measurements to the securities holdings may result in values substantially above or below their carrying values, these unrealized changes in value would have no direct effect on the quantity of reserves available to the banking system or on the prospects for future Bank earnings or capital. Both the domestic and foreign components of the SOMA portfolio may involve transactions that result in gains or losses when holdings are sold prior to maturity. Decisions regarding securities and foreign currency transactions, including their purchase and sale, are motivated by monetary policy objectives rather than profit. Accordingly, fair values, earnings, and any gains or losses resulting from the sale of such securities and currencies are incidental to the open market operations and do not motivate decisions related to policy or open market activities. In addition, the Bank has elected not to present a Statement of Cash Flows because the liquidity and cash positions of the Bank are not a primary concern given their Reserve Banks’ unique powers and responsibilities. Other information regarding the Bank’s activities is provided in, or may be derived from, the Consolidated Statements of Condition, Income and Comprehensive Income, and Changes in Capital. There are no other significant differences between the policies outlined in the FAM and GAAP.= No intention to deceive, it just lies. So there.