Why Did The Fed Inject Banks With A Record Amount Of “Other” Cash In The Past Week?

November 27th, 2011

FAKE NEWS for the Zionist agenda

Zero Hedge
Saturday, November 26, 2011

For all its obscurity, the Fed’s balance sheet is relatively simple: on the right there are the liabilities such as currency in circulation (which is relatively flat at around $1.1 trillion but rising slowly (for now) every week), and excess reserves, at $1.5 trillion, or the money that is “parked” with banks and is the topic of so much consternation: will it ever spill out into the broader economy, won’t it, and if not why not, and if yes, will it cause hyperinflation, and other such tangential ruminations. Then on the left we have the assets, or the “stuff” that backs the currency in circulation and excess reserves, such as Treasurys and MBS, which total $2.6 trillion, and which are the primary variable in every Large Scale Asset Purchase episode also known as Quantitative Easing: should the Fed “print”, or said otherwise, “purchase” assets, then the excess reserve number goes up first, with a hope that it will slowly spill over into currency in circulation and other broader monetary aggregates. Lastly, there is also the Fed’s capital account or “shareholder equity” for purists, but since the Fed can never in theory be undercapitalized by conventional definitions, this is merely a placeholder. Another broad way of looking at the Fed’s assets is “factors that supply reserve funds” or “source of cash”, and liabilities as “factors that absorb reserve funds” which is, logically, “use of cash.” The key assets and liabilities noted above are the major components of the “flow” – they move glacially up and down, and are priced in well in advance of such moves. It is the marginal, or far small numbers that matter, and that fluctuate materially from week to week, that are not priced in, and are thus market moving. One such curious liability which we pointed out recently is the Fed’s reverse repo agreements with foreign banks: in the week following the MF Global bankruptcy these soared to a record $124.5 billion. Basically, foreign banks scrambled to procure a record amount of US Dollars while repoing Treasurys and who knows what else with the Fed, an indication that other conventional liquidity conduits had frozen in the days following the Halloween MF massacre. Since then the Fed’s Reverse Repo balance has moderated to more normal levels as Treasurys have gone out of repo with the Fed. Yet something more troubling has just been spotted. In today’s one-day delayed issue of the Fed’s H.4.1, literally the very last number on the very last subpage in the weekly update reveals something quite disturbing. Namely the Fed’s “other” non-reserve based factors absorbing liquidity. And specifically, the actual number, which rose by an unprecedented $88 billion in one week to an all time high of $115 billion for the week ended November 23!

Why is this troubling? Because unlike reserves, this number is effectively not defined, and there is no clear transposition between assets and liabilities, not to mention that “other” could mean virtually anything. So in SOME ways this could simply be a plug to a plug (such as Fed Capital), and reading too much into it may simply be an exercise in futility. On the other hand, what we do know, is that by the generic definition of factors absorbing liquidity, in the past week, a domestic financial institution (because unlike last time around, this was not a foreign-based need for cash) was the willing and ready recipient of an incremental $88 billion in “reserves” – read cold, hard cash. Because if it is a plug, what it is “plugging” is an $85 billion drop in F.R. bank reserves which declined from $1.575 trillion to $1.489 trillion, an $85 billion decline. Which leads us to the question: is the “Other” deposit merely a slush fund to convert “on the books” reserves into an “other” use of proceeds. In other words, the question is – just what event is it that caused the rotation of $85 billion in reserves into $88 billion in “other” liquidity absorbing factor, and what do Economics textbooks teach about massive swings in “Other” F.R. deposits? What – Nothing?

We wonder: in this day and age of trillions in fungible excess reserves, and discount window stigmata, just what was it that caused US banks to demand a record amount of effectively under the table cash from the Fed?

Exhibit 1 and only:

Source: bottom right

And for those curious what comprises the “Miscellaneous Deposits” category which may or may not comprise the full “other” subcategory, we refer to the Financial Accounting Manual For Federal Reserve Banks, section 11.30 (220-400):

A wide range of miscellaneous deposit accounts are carried on the books of the Reserve Banks. The deposits arise from depositary responsibilities assigned to the Reserve Banks by law—such as accounts opened by the Federal Deposit Insurance Corporation to cover closed banks and checking accounts opened by government agencies. Deposits also arise from work in process at the Reserve Banks, such as payments received from employee subscriptions to savings bonds, funds received for the account of new depository institutions which have not as yet opened for business, and interest paid on securities held pending redemption in federal estate tax cases. Deposit accounts are also carried for purposes that are peculiar to only one or a few Reserve Banks. The Board of Governors, for example, maintains a general fund account at the Richmond Reserve Bank to cover general disbursements and another to cover payroll charges and the Federal Reserve Employee Benefits Office maintains accounts with the New York Reserve Bank. The individual accounts and balances comprising this account should be detailed on the Reverse of the form 34. The individual account descriptions should be adequate to identify the different types of accounts maintained under this heading. For example, “Employee subscriptions to savings bonds” is a sufficient description, rather than Miscellaneous Deposit account 1, etc.

Somehow, we don’t quite understand how the above explains an $88 billion swing in one week.

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8 Responses to “Why Did The Fed Inject Banks With A Record Amount Of “Other” Cash In The Past Week?”

More secret printing. This is how they keep gold and sliver down. We will have to wait for the EURO collapse.
The Fed is stocking the banks so that when the bank runs start, there will be a supply of dollars to prolong the period of hyperinflation before the banks go bust, or run out of cash. Simple.

getreal500 Reply:
November 26th, 2011 at 9:30 am

Are you implying that the banks are actually going to hand our money over to us if bank runs start? Remember MF Global? The only ones that got money were the top account holders, like the Koch brothers. I don’t think all this money is for me or you.
No geniuses. It is the start of the holiday shopping season. There is going to be a lot of cash transfer over the next 3 or 4 weeks.

getreal500 Reply:
November 26th, 2011 at 3:10 pm

So why do they have to “add” cash if it’s a transfer, monkeybutt?
The Federal Reserve has never stopped lending money to the banks foreign and domestic since the “crisis” officially started in 2008.

What we see here in the US is the creation of money by lending it into existence and the claiming the make believe money is owed to someone called investors. The money is made scarce by the refusal of the big banks to lend it into the economy at the amount it is lent to them but parking it back at the Federal Reserve to earn a higher iterest rate then the fed charged the banks to borrow the money.

The wall streeet investment firms turned banks/mobs create derivitive securities by repackaging their loans, bonds, and other instruments that have been foisted on governments around the world and have sold them to pension funds, local and state government funds as well as foreign sovereign nations, to make large fees off of the transfer.

It doesn’t stop there. The investment banks will then often turn around and make bets against the securities they just sold the mutual or government fund to make obscene profits on each transaction.
They have been sued many times by pension funds but you never hear about it because it is usually settled and part of the settlement is nondisclosure.

This is exactly what happened to Greece, is happening to Italy, Spain, Portugal, Ireland, all of Europe.

It is happening here – it started here.

The reason the EU can’t come up with a bailout plan is because the EU wants the sovereign nations of Europe to fail financially.

The reason the Unconstitutional Super Comittee couldn’t agree on budget cuts is because the traitors on the Unconstitutional Super Comittee want the President to usurp the authority of the Congress and make budgets without input from your elected representative.

The Fed has continued to “lend” money to the big European banks and that is proof that the bailouts for Greece and the rest of Europe was intended not to rescue the economies of these nations but to enslave them. The European Central Bank could simply loan the euros into existence if they were serious about a bailout just like the Fed does.

Are ther any patriots left in any government in the western world who give a damn about their people and country?

Hermes Reply:
November 26th, 2011 at 11:06 am

The destruction of all paper currencies is now a mathematical certainty. The harm caused can be mitigated but only if there is drastic change. Anything can happen if you want it enough.

The end game for these banksters is not a world currency, as I see it, it is no currency. A chip.

It’s up to you. Prepare right now.
Nice blog Hermes you’re probably right. But looking at this chart is incredable. Notice the graph lines around the September, October 2008 go way up. But the chart goes off the chart (pardon the pun) just around the time of this Euro crisis, starting with Greece and now Italy. It is telling me that Italy is the final straw really. And god help us if the whole Euro collapses and regular people can’t get their money from banks to live on. Now is a great time to watch the big boys like the Koch brothers, Goldman Sachs upper level crooks, JP Morgan higher ups, watch what they are doing with “their” money. What are they pulling out of? Stocks? Bonds? Just like when Koch pulled all his cash out of MF Global, what is he pulling out of today. Just follow his money.