Flash Point: QE3 and the Fed’s Balance Sheet

An article today in Bloomberg, Fed officials laud stimulus, quibble over future plans, reminded us of the new Fed stimulus program, QE3. As the article states:

In September, the Fed announced an open-ended bond buying scheme that began with $40 billion per month in mortgage-backed securities [MBSs].

We should see the impact by now on the Fed’s balance sheet. Consider the graph of Total Assets from FREDĀ®:

In the 3 months since Sept. 5, the balance sheet has only increased by about $30 billion. Admittedly we haven’t done the homework to see when the program actually began, but if it’s operational we don’t see the result. Taking a look at the fed’s purchase of MBSs over the same period we get this graph:

We see the increase in MBSs was about $40 billion accounting for the balance sheet expansion but well short of the $40 billion per month expected. We will monitor this graph in case there is a delay in purchase completion.

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