New York Fed, and pots and kettles

Article Highlights

  • The NY Fed's $2.6 trillion in assets and $18 billion in capital give it a risible capital ratio of 0.7%, and a leverage of 139:1

    Tweet This

  • With $4.2 trillion in assets and $56 billion in capital, the consolidated capital ratio of the Fed is1.3%, and its leverage is 75:1

    Tweet This

"More Yellen on Bank Capital " (Heard on the Street, April 16) relates that Fed Chairwoman Janet Yellen has suggested the possibility of "even higher capital requirements" for banks. That would be higher than the minimum 5% capital ratio, which equals a maximum 20:1 leverage limit, now required for large bank-holding companies. This logically leads one to ask: What are the capital ratio and the leverage of the Federal Reserve itself, with its new, much riskier balance sheet? The answer is that with $4.2 trillion in assets and $56 billion in capital, the consolidated capital ratio of the Fed is a mere 1.3%, and its leverage is 75:1.

That's low capital and high leverage, but the overall numbers don't begin to match those of by far the biggest and most important Federal Reserve Bank, that of New York. The New York Fed's $2.6 trillion in assets and only $18 billion in capital give it a risible capital ratio of 0.7%, and a leverage of 139:1.

Something about pots and kettles springs to mind. I have heard it argued that low capital ratios or even negative net worth don't matter if you are the Fed. Maybe.

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Alex J.
Pollock

What's new on AEI

Making Ryan's tax plan smarter
image The teacher evaluation confronts the future
image How to reform the US immigration system
image Inversion hysteria
AEI on Facebook
Events Calendar
  • 01
    MON
  • 02
    TUE
  • 03
    WED
  • 04
    THU
  • 05
    FRI
Wednesday, September 03, 2014 | 9:00 a.m. – 10:30 a.m.
From anarchy to Augustus: Lessons on dealing with disorder, from Rome’s first emperor

We invite you to join us for two panel discussions on how Augustus created order from chaos 2,000 years ago, and what makes for durable domestic and international political systems in the 21st century.

Wednesday, September 03, 2014 | 12:00 p.m. – 1:30 p.m.
Multiple choice: Expanding opportunity through innovation in K–12 education

Please join us for a book launch event and panel discussion about how a marketplace of education options can help today's students succeed in tomorrow's economy. Attendees will receive a complimentary copy of the featured book.

Thursday, September 04, 2014 | 12:00 p.m. – 1:30 p.m.
How conservatives can save the safety net

Please join us for a luncheon event in which our panel will discuss what conservatives can learn from how liberals talk and think about the safety net and where free-market economics, federalism, and social responsibility intersect to lift people out of poverty.

No events scheduled this day.
No events scheduled this day.
No events scheduled today.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.