After flattening out, it headed higher 8 straight weeks with QE2, until dipping just slightly in the latest week. When the Fed wants to sell MBS and other securities, who's gonna buy? Details inisde.
(Source - Reuters) - The U.S. Federal Reserve's balance sheet fell in the latest week, following eight consecutive weeks of growth, as agency mortgage-backed securities holdings fell more than Treasury holdings increased, Fed data released on Thursday showed.
The balance sheet -- a broad gauge of Fed lending to the financial system -- declined to $2.403 trillion in the week ended December 29 from $2.410 trillion the prior week.
The balance sheet has been expanding since the U.S. central bank last month began a second bout of quantitative easing, known as QE2. The Fed expects to execute about $600 billion in U.S. government debt purchases over an eight-month period in an effort to stimulate the economy.
The balance sheet had topped the previous record of $2.333 trillion set in May as the Fed was about to end its initial round of bond purchases that involved $300 billion of Treasuries and $1.425 billion in mortgage-related securities.
The second round of quantitative easing follows the Fed's use of proceeds from maturing mortgage securities in its portfolio to buy Treasuries -- a move that started in August. Since that time, it has purchased about a combined $236 billion in Treasuries.
Answer this important question Bernanke: