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https://3.bp.blogspot.com/-kHu39twxkMM/WOUIipWd23I/AAAAAAAAA8o/-Ayy6aXRV1oW8I0uU_E4JVC1p85UNdMrwCLcB/s1600/fredgraph.png

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Posted by Derek Henry
Posted on 04/05/2017 4:09 PM
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1. Factors Affecting Reserve Balances of Depository Institutions (continued)
Millions of dollars
Reserve Bank credit, related items, and Averages of daily figures Wednesday
reserve balances of depository institutions at Week ended Change from week ended Mar 29, 2017
Federal Reserve Banks Mar 29, 2017 Mar 22, 2017 Mar 30, 2016

Currency in circulation (11) 1,534,102 + 2,310 + 92,829 1,536,334
Reverse repurchase agreements (12) 468,923 – 12,486 + 164,714 510,897
Foreign official and international accounts 249,997 + 5,058 + 14,231 250,540
Others 218,926 – 17,544 + 150,483 260,357
Treasury cash holdings 266 + 3 + 49 267
Deposits with F.R. Banks, other than reserve balances 160,621 + 12,663 – 166,644 150,725
Term deposits held by depository institutions 0 0 0 0
U.S. Treasury, General Account 65,187 – 5,640 – 219,473 63,101

https://www.federalreserve.gov/releases/h41/current/default.htm

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Posted by Dennis
Answered on 04/05/2017 5:43 PM
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    Cullen, Is this the amount of Uncle Sam’s funds that are held by the Fed? Are we going to see a big jump April 15th when the income tax “checks” come in? Or is Uncle Sam running out of money in its bank account because it has moved its moolah to its checking account? Or does congress need to raise the so-called “debt limit” sooner rather than later?

    https://fred.stlouisfed.org/series/WTREGEN

    https://alfred.stlouisfed.org/series?seid=WTREGEN&utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=alfred

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    Posted by Dennis
    Answered on 04/05/2017 6:02 PM
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      Notes from the above Fed release “WTREGEN”:

      “This account is the primary operational account of the U.S. Treasury at the Federal Reserve. Virtually all U.S. government disbursements are made from this account. Some tax receipts, primarily individual and other tax payments made directly to the Treasury, are deposited in this account, and it is also used to collect funds from sales of Treasury debt.”

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      Posted by Dennis
      Answered on 04/05/2017 6:24 PM
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        It’s the TGA account.

        But look at it. It’s unbelievable.

        Massive increase in bank reserves, up nearly $400 billion.Because commercial banks have a fixed asset-to-capital ratio they couldn’t lend anymore. Teasury is unable to off load them because of the debt ceiling.

        Which is why commercial bank lending has fell off a cliff. They are having to sell assets to raise cash.

        https://fred.stlouisfed.org/series/TDAACBM027SBOG

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        Posted by Derek Henry
        Answered on 04/05/2017 9:26 PM
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          Looks pretty normal to me. Add in the supplementary accounts and this is just another day at the office.

          https://fred.stlouisfed.org/series/WOFDRBORBL

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          Cullen Roche Posted by Cullen Roche
          Answered on 04/11/2017 11:53 AM
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            It just debt ceiling evasion.

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            Posted by MachineGhost
            Answered on 04/12/2017 12:06 AM
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              Quite a few people think it is because of the leverage ratio.

              You boost the commercial banks assets they need to maintain capital ratio/leverage ratio to do so meant the banks had to stop lending ?

              All part of Basel 3.

              Nobody seems to know why bank lending has fallen off a cliff and some people think it is because of that graph.

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              Posted by Derek Henry
              Answered on 04/12/2017 7:41 PM
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                Cullen showed the chart that indicates the percent change from the year before, not the actual amount. The percent change MUST slow as the actual $ amount number gets bigger and bigger. The percent change from a previous time always exaggerates the issue IMHO: https://fred.stlouisfed.org/series/TOTLL

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                  Posted by Dennis
                  Answered on 04/12/2017 8:35 PM
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                    Why would not the banks who can earn 1% on Reserves be borrowing overnight the $2T of reserves from the GSEs who can earn no IOR and paying them less than the 1% to make this small carry on the 2T?

                    One answer: they don’t have the capital to put those excess reserves on the bank balance sheets and not violate the Leverage Ratio.

                    Leveraging the Leverage Ratio by J.P Morgan

                    https://www.jpmorgan.com/jpmpdf/1320634324649.pdf

                    So when they jam these reserves down the throat of banks in short periods of time like they have recently done for $400B in short order, the question is can banks react with the same frequency response in their regulatory capital account to accommodate the new reserve assets?

                    he frequency response of bank assets is much higher than the frequency response of regulatory capital so you have a classic frequency mismatch from Systems Theory standpoint.

                    Its not like they can refuse someone who wants to deposit a government check for $400B.

                    What is the ‘Tier 1 Leverage Ratio’
                    The Tier 1 leverage ratio is the relationship between a banking organization’s core capital and its total assets. The Tier 1 leverage ratio is calculated by dividing Tier 1 capital by a bank’s average total consolidated assets and certain off-balance sheet exposures. Similarly to the Tier 1 capital ratio, the Tier 1 leverage ratio is used as a tool by central monetary authorities to ensure the capital adequacy of banks and to place constraints on the degree to which a financial company can leverage its capital base.

                    “calculated by dividing Tier 1 capital by a bank’s average total consolidated assets”

                    I believe the H.8 report accounts “reserves” as part of bank total assets under Line Item 34 ‘Cash Assets’ here:

                    https://www.federalreserve.gov/releases/h8/current/

                    Line 34 has Note 21 which says:

                    “21. Includes vault cash, cash items in process of collection, balances due from depository institutions, and balances due from Federal Reserve Banks.”

                    ‘balances due from Federal Reserve Banks’ I view as aka ‘Reserve Balances’

                    So if these “balances due from Federal Reserve Banks’ are treated just as any part of bank consolidated assets and they are not automatically part of ‘declared reserves’ at a bank upon receipt, then to maintain a constant Leverage Ratio, imo it appears a bank would have to liquidate other assets if bank deposits from TGA were to spike ??

                    USD balances in the TGA are not counted as reserves…. so when Treasury ran the TGA up to over 400B in umprecedented fashion last year that would have the effect of reducing reserve balances on bank balance sheets…. you could see this on the H.8…. , then disgorged them in about a month, it had a short term effect of increasing reserve assets on bank balance sheets by 400B in a very short period of time as the Treasury didnt do a ‘reserve drain’ by issuing bonds before they withdrew from the TGA… they in effect did the ‘reserve drain’ well in advance by running up the TGA by 400B+ over the previous year…

                    Withdrawals from the TGA add system reserves if they are not first offset by Treasury issuance $4$ in advance…

                    In normal circumstances, the Treasury does a reserve drain (by issuing bonds) BEFORE they do the reserve add via TGA withdrawal…

                    Also we have reserve balances very high (If it is continually returning interest to Government the balance sheet is way to big.”) with the QE which is also unprecedented… so 400B of that ended up in the TGA last year by UST issuing bonds well in advance of necessary withdrawals….

                    If the sharp increase in reserve assets caused by this TGA policy effected the regulatory “Leverage Ratio” then that would perhaps be a problem for banks if it was not well coordinated between Treasury and the member banks beforehand.

                    Capital Ratio looks like a qualitative measure while Leverage Ratio is a purely quantitative measure.

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                    Posted by Derek Henry
                    Answered on 04/12/2017 8:47 PM
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