bacpacker
03-05-2013, 11:35 PM
Here is some interesting discussion on what comes after the US interest rates start climbing again.
http://www.businessinsider.com/fed-remittances-to-treasury-to-decline-2013-3
The Fed Is Starting To Prepare For A Future PR Nightmare
Matthew Boesler | Mar. 4, 2013, 11:28 AM | 158,404 | 67
Everyone wants the Federal Reserve to say how it will unwind the $3 trillion balance sheet amassed from years of quantitative easing.
Indeed, this was something of a hot topic in Fed Chairman Ben Bernanke's testimony before Congress last week.
One of the big issues the central bank faces is the inevitable loss it will have to take when interest rates rise and the value of the Fed's bond portfolio declines.
Although not an economic problem — as "losses" for a central bank are more of an accounting issue — there could be a PR problem when the Fed stops making payments to the Treasury from the interest income it receives on its bond portfolio.
Deutsche Bank strategist Stephen Abrahams recently explained why this could be such a nightmare:
The possibility of suspending remittances and carrying unrealized losses could complicate the Fed’s relationships with the rest of Washington and the public. While remittances help the federal government pay down debt, any shortfall in operating income leading to a suspension of remittances would require the Fed to borrow from Treasury.
http://www.businessinsider.com/fed-remittances-to-treasury-to-decline-2013-3
The Fed Is Starting To Prepare For A Future PR Nightmare
Matthew Boesler | Mar. 4, 2013, 11:28 AM | 158,404 | 67
Everyone wants the Federal Reserve to say how it will unwind the $3 trillion balance sheet amassed from years of quantitative easing.
Indeed, this was something of a hot topic in Fed Chairman Ben Bernanke's testimony before Congress last week.
One of the big issues the central bank faces is the inevitable loss it will have to take when interest rates rise and the value of the Fed's bond portfolio declines.
Although not an economic problem — as "losses" for a central bank are more of an accounting issue — there could be a PR problem when the Fed stops making payments to the Treasury from the interest income it receives on its bond portfolio.
Deutsche Bank strategist Stephen Abrahams recently explained why this could be such a nightmare:
The possibility of suspending remittances and carrying unrealized losses could complicate the Fed’s relationships with the rest of Washington and the public. While remittances help the federal government pay down debt, any shortfall in operating income leading to a suspension of remittances would require the Fed to borrow from Treasury.