The Fed’s Expanding Balance Sheet

Many banks availed themselves of the Fed’s loan facilities previously described. As a result, the Fed’s balance sheet expanded significantly as the crisis unfolded. Like any balance sheet, the Fed’s is a snapshot of its assets, liabilities, and net worth on a specific date. Over the course of the crisis, the Fed’s balance sheet—generally measured by its total assets—more than doubled. Specifically, from the end of 2007 to the end of 2008, total assets rose from $915 billion to $2.3 trillion, an unprecedented increase.
Concerns about the Fed’s balance sheet arise in thoughtful critiques of the government’s response to the crisis. However, often left unexplained is the significance of the expansion in the Fed’s ...

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