US govt securities on the Fed`s balance sheet sheet

franzino

Why are the US Govt securities an asset on the Fed`s balance sheet...

The Fed is the banker to the US govt....

The Fed sells US govt securities through the FOMC operations to control the money supply in the US economy.....

Suppose it wants to increase money supply so it will issue Govt securirties and banks and insurance companies or any other institution would buy it....so that T-Bill/T-Note will be a liability on the Fed`s balance sheet as it has to repay the principal amount on the maturity date....

btcapital

US Fed and US Treasury are 2 separate entities.

Treasury Bills in the market held by public, are a Liability of US Treasury and not that of US Fed.

In Fed's balance sheet, Treasury Securities appearing there as Assets are the ones that Fed has bought from the market thru Open Market transactions.

smartpants

so the US Treasury issues the Govt securirties? i.e. on the behalf of the Govt ?

dece2011

Yes, US Teasury issues them. Fed, i guess only acts as their agent in selling them.