Keeping you up to date on the latest data releases.
- The Federal Reserve Balance Sheet
American International Group (AIG) executed its exit plan from Federal Reserve assistance during the previous two weeks. The $19.9 billion balance for the revolving credit facility open to AIG was completely repaid by using funds that AIG acquired in the sale of a set of its subsidiaries. Extra cash from those sales (about $6 billion) went toward repurchasing the preferred interests that the Fed held in AIA Group and American Life Insurance Company. The remaining balance of those preferred interests ($19 billion) was bought by AIG using Troubled Asset Relief Program money. The entirety of the preferred interests was transferred to the Treasury by AIG. At this point, the only aid to AIG remaining on the Fed’s balance sheet is Maiden Lane II and Maiden Lane III, both of which do not contain any direct exposure to AIG. Also, Maiden Lane III made a larger-than-usual payment on its loan from the New York Fed, dropping the balance of the loan below $13 billion. The amount of securities lent to dealers remained elevated (around $13.5 billion), nearly $10 billion above the 2010 average. This may be a new norm given the expanding balance of security holdings on the balance sheet. The Treasury announced that they are going to gradually lower the balance in the Supplemental Financing Account (SFA) because of recent estimates that show that the United States will hit its legal debt limit by the end of March. Securities issued for the SFA are 56-day securities, so to lower the balance in the account, the Treasury plans to stop rolling over the securities. Also, the Treasury General Account spiked again. This type of spike is not unfamiliar for a January, and looks similar to January 2010, but it will be interesting to see how this account reacts to the decline in the SFA. When the SFA was reduced due to an approaching debt ceiling in October 2009, the General Account experienced elevated balances.