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The Fed recently reaffirmed its determination to expand its balance sheet. The crisis has already driven it to take on risky assets such as agency bonds and commercial paper. It has also lent to weak financial institutions, and is expected to participate in the Treasury’s public-private partnership to buy toxic assets. The expansion has averted a crippling credit contraction. But the Fed could lose money by taking on risk.
FOMC Statement
Bernanke: Four Questions About the Financial Crisis
Economist: The Fed
Guha: Fed Move to Buy Treasuries Stuns Investors
FT: Bold Bernanke
Economist: Central Banks
Update (5/26/2009): Per suggestion from C.F. Reader
Mr. Swartz, please revise your interesting
graph to show the red Traditional Assets as
a continuing bottom layer, and [R]isk Assets
as a wedge layer above that, thus showing
clearly the downslope in [T]raditional
Assets, something like:
RRRRR
RRRRRRRR
TTTTTTTTTTTTTTRRRRRRRRRRR
TTTTTTTTTTTTTTTTTRRRRRRRR
TTTTTTTTTTTTTTTTTTTTTTTTT
TTTTTTTTTTTTTTTTTTTTTTTTT
Unfortunately, leading spaces above were
eliminated, and the code tag did not
produce exact monospace font. The R’s
should all line up right-justified.
But you get the idea, hopefully
Note to webmaster: a preview button would
be nice. Also use of pre tag.