Following the beginning of the financial crisis in 2008, the Federal Reserve introduced a number of new policy tools that have altered both the size and composition of the Federal Reserve’s balance sheet. The purpose of these tools was to support the functioning of financial markets, especially during the crisis, and to provide additional accommodation to the economy during the subsequent recession and recovery when the traditional policy tool, the federal funds rate, was constrained near zero.
Former Federal Reserve Chairman Ben Bernanke called the use of the balance sheet in this way “credit easing,” and he broadly divided the tools used into three categories:
- Lending to financial institutions
- Providing liquidity to key credit markets
- Purchasing longer-term securities
Our credit easing chart shows the balance sheet with its components broadly divided into these categories, with longer-term securities separated into Treasury securities and federal agency securities, plus the base of traditional Federal Reserve assets. You can select different views on the chart to see the assets of the balance sheet in a number of ways.
- W(h)ither the Fed's Balance Sheet? This Economic Commentary explains the development of new monetary policy tools developed to address the financial crisis of 2007 and that came to be known as “credit easing.” [12.01.2010 ]
- The Shout with Operation Twist. This brief article explains Operation Twist, the policy introduced by the FOMC in September 2011 to extend the average maturity of its portfolio by selling short-term Treasury securities and purchasing longer-term Treasury securities. [10.18.2011]
- Revisions to credit easing. This document describes revisions that were made to the indicator in 2016.