The U.S. Federal Reserve system now owns about 15 percent of the roughly $17 trillion worth of U.S. treasury securities, making it the treasury’s biggest single creditor.
The Fed’s stake has increased by $650 billion in the last month. On 23 March, Fed chair Jerome Powell said the central bank would place no limits on the amount of additional treasury securities it would buy to keep the economy oiled.
At its current buying rate, the Fed “will own the entire Treasury market in about 22 months,” noted Wall Street on Parade, an online publication.
Big banks and investment houses are complicit, submitting huge volumes of treasuries to the Fed for purchase to reclaim cash now that dollars are rising in value.
In 2008, just before the beginning of the Great Recession, a $10,000 ten-year treasury bond was paying 4 percent, or $400. Today, it pays $67; 83 percent of the yield has disappeared.
The low yields have driven many individual investors out of bonds and into the riskier stock market in search of higher returns, a strategy that has turned tragic for anyone not wealthy.
Indirectly, the Fed also is playing the stock market. As part of its attempts to retrieve the economy from the brink, the Fed is now accepting stocks as collateral for loans it makes to banks at 0.25 percent interest.
In addition, the Fed has revived its Primary Dealer Credit Facility, or PDCF, a gaggle of programs through which the Fed doled out $29 trillion from December 2007 through at least last July to U.S. banks, partners in banks’ derivative schemes, and foreign central banks.
The Fed had not been required to report to any oversight authority about which banks were getting the funds, how much, or why.
But, now, the Dodd-Frank legislation that implemented new rules governing finance after the Great Recession requires the Fed to notify Congressional oversight committees within one week of any emergency loans being made, including the names of banks that get them and the collateral pledged.
According to the Fed’s latest disclosure form, since 17 March, it has dispersed through the resuscitated PDCF but apparently has not disclosed details to Congress as the law requires.
