Friday, June 19, 2009

Can the Fed Go Belly Up?

During the bubble years, we worried that investment banks got overlevered running up leverage ratios (ratios of assets to equity) of thirty and forty times. We all know what happened then.

The Federal Reserve Bank of New York's Consolidated Balance Sheet shows its leverage ratio was 37.5 times at year end 2007. Its President in 2008 was a Timothy Geitner (now Secretary of the Treasury.) At the end of 2008, the Fed of New York achieved a leverage ratio of 112.5 times.

Maybe their old boss can bail them out if they go bust now that some banks are buying back TARP stock.

No comments: