The Federal Reserve sharing a $5.8 trillion portion as of September 25th 2009. The following table provides details on the announced limit of the capital committed by the Federal Reserve and the current amount used.

All data provided by Bloomberg.

Bloomberg – Fed’s Strategy Reduces U.S. Bailout Pledges to $11.6 Trillion – http://joeyconway.com/rpyqmf

 The Manhattan Chief U.S. District Judge ruled against the central bank saying the central bank “improperly withheld agency records” by “conducting an inadequate search” after Bloomberg News reporters filed a request under the information act.  The Judge gave the Fed 5 days to locate the documents and turn them over.

All the Federal Reserve’s actions have been taken, in their opinion, in the public’s interest.  If the Fed’s actions are the public’s interest and the public’s money is being used, the public is entitled to know.  Perhaps, if the Fed had known last year, using the public’s money in the public’s “best interest” would compromise their secracy, they might have been more stingent with their lending standards or more transparent about their process.

Bloomberg Article: http://joeyconway.com/3t9zev

For an overall comprehensive list of all the bailout programs by Congress, Treasury and the Fed: http://joeyconway.com/73da87

List of 650 banks, so far, which have received bailout money: http://joeyconway.com/7rz83r

List of 94 failed banks, so far, which the FDIC has taken over:  http://joeyconway.com/rvtaxw

Essentially, the Fed is stating, market participants, without this government program, would not be able to meet the credit needs of households and small businesses.  In simple economic terms, the demand for credit from households and small businesses would not be met with a sufficient supply of credit from market participants.

There are many different ways to approach this situation.  This should be the most straight forward and simple explanation.  Market participants, who are businesses required to turn a profit or they will go bankrupt, will supply credit to these households and small businesses until it becomes too risky resulting in unprofitable loans.  If there is not a sufficient supply of credit in the market, it most likely means supplying credit is not profitable or the risk outweighs the return.  The main risk facing the market participants is that the households and small businesses will default on their credit and the market participants will not make a profit, potentially going bankrupt.

Through this Loan Facility, the Federal Reserve has taken on the role of subsidizing market participants, banks and large investors, thus eliminating some of the downside risk that households and small businesses will default.  Since some of the downside risk has been mitigated by the Fed, the market participants are now in turn willing to supply more credit, make more loans.  The downside risk of potential default by households and small businesses has been transferred from the balance sheet of banks and investors to the Federal Reserve’s balance sheet which is funded through our tax dollars and the Fed’s ability to print dollars. 

CNN Money – Breakdown of TALF Program: To TALF or not to TALF http://joeyconway.com/663n2a

Federal Reserve Definition TALF – http://joeyconway.com/mn5zbc

Federal Reserve TALF F.A.Q. (34 pgs) – http://joeyconway.com/ehnrkp

• $695.758 billion – U.S. Treasury Securities
• $105.915 billion – Federal Agency Debt Securities
• $542.888 billion – Mortgage-backed Securities
• $274.085 billion – Direct Bank Lending (Loans through Discount Window and similiar programs, plus lending through term auction credit)
• $104.347 billion – Bailout Funds for Bear Stearns and AIG
• $87.783 billion – Central Bank Liquidity Swaps
• $68.106 billion – Commerial Paper/Money Market Facilities
• $30.422 billion – Term Asset-Backed Securities Loan Facility (TALF)

Grand Total – $1.9 trillion

WSJ – Federal Reserve Balance Sheet, graph and breakdown: http://joeyconway.com/4y3pwm

Federal Reserve’s Latest Data, released every Thursday: http://joeyconway.com/phze7r