Has Anyone Thought About Recapitalizing the Fed, Which Is Underwater by Billions of Dollars?
The answer is ‘yes’ — the authors of the Federal Reserve Act, for starters.
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The Federal Reserve seems to many people to be a mysterious power, something like the Wizard of Oz in the classic movie version of the story. Yet the Federal Reserve Banks are banks, with assets, liabilities, capital, and profits and losses like other banks. What stands out in the last year and a half are the losses — totaling a staggering sum, $149 billion. The FRBs, in other words, have run through about 3.5 times their total capital.
The Fed’s real capital as of mid-February 2024 is its stated capital of $43 billion minus the losses of $149 billion, or by ineluctable arithmetic a negative $106 billion. The Fed disguises this in its published financial statements by booking its losses as an asset. Luckily for it, the Fed is not an SEC filer. It is a striking irony that the greatest central bank in the world feels compelled to fall back on issuing questionable financial statements.
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