Tags: CNSNews | Presidents | Outspend | Fed

CNSNews: Presidents Washington to Clinton Couldn't Outspend the Fed

By    |   Sunday, 29 Sep 2013 06:25 PM

Due to its stimulus programs, the Federal Reserve's balance sheet now overshadows the combined debt amassed by every president from George Washington to Bill Clinton, says CNSNews.

Five years ago, a week before Lehman Brothers collapsed, the Fed reported its assets totaling $924 billion, according to Bloomberg.

To help the U.S. recover from the financial crisis that followed Lehman's demise, the Fed began purchasing U.S. Treasury bonds and then mortgage-backed securities (MBSs).

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The Fed's balance sheet surpassed the $3 trillion mark on January 23, Bloomberg says the central bank reported.

Last week, the Fed announced it will continue purchasing assets at a pace of $85 million a month. That same day, it released its weekly accounting sheet, which shows holdings of over $2 trillion in Treasuries and over $1.3 trillion in MBSs.

The Fed's balance sheet is now over $3.39 trillion, which exceeds the $3.8 trillion in debt U.S. presidents had racked up as of the start of business on November 23, 2001, says CNSNews.

“You’re hard-pressed to find another example in history where the Fed pulled out all the stops to help a recovery along,” said Michael Hanson, senior U.S. economist at Bank of America and a former Fed economist.

“It’s at least as revolutionary as Paul Volcker coming in and saying we’re going to hike rates until inflation” declines, he told Bloomberg.

The Fed has committed to keep spending until the economy appears strong enough to warrant a withdrawal of the stimulus and employment improves, though it said it may adjust the pace of its purchases.

Taxpayers have reaped record rewards from the central bank's spending thus far. Bloomberg says the Fed paid the Treasury almost $89 billion last year from interest earned on it bond holdings. But a paper written by researchers at the Fed said these windfalls could be at risk in upcoming years as rates rise.

Critics of the Fed's monetary policy readily cite concerns that the burgeoning balance sheet will make it more difficult for the central bank to unwind the stimulus programs. And some members of the Federal Open Market Committee (FOMC) have expressed the same concerns.

Esther George, president of the Federal Reserve Bank of Kansas City, was the only voting FOMC participant to object to the idea of continuing to purchase assets at the current pace.

Her concern was “that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations,” said CNSNews.

Editor’s Note: Add Up to $152,046 to Your Social Security Benefits Using Weird Trick

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Due to its stimulus programs, the Federal Reserve's balance sheet now overshadows the combined debt amassed by every president from George Washington to Bill Clinton, says CNSNews.
CNSNews,Presidents,Outspend,Fed
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2013-25-29
Sunday, 29 Sep 2013 06:25 PM
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