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.