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Accounting "CHANGE" Makes Insolvency Impossible For Fed: Liabilitiies Go To US!

Accounting Tweak Could Save Fed From Losses
Published: Friday, 21 Jan 2011 | 4:58 PM ET
By: Reuters

Concerns that the Federal Reserve could suffer losses on its massive bond holdings may have driven the central bank to adopt a little-noticed accounting change with huge implications: it makes insolvency much less likely.

The significant shift was tucked quietly into the Fed's weekly report on its balance sheet and phrased in such technical terms that it was not even reported by financial media when originally announced on Jan. 6.


"Could the Fed go broke? The answer to this question was 'Yes,' but is now 'No,'" said Raymond Stone, managing director at Stone & McCarthy in Princeton, New Jersey. "An accounting methodology change at the central bank will allow the Fed to incur losses, even substantial losses, without eroding its capital."

The change essentially allows the Fed to denote losses by the various regional reserve banks that make up the Fed system as a liability to the Treasury rather than a hit to its capital. It would then simply direct future profits from Fed operations toward that liability.

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Duplicate thread.

Duplicate thread. http://dailypaul.com/node/154917

Ĵīɣȩ Ɖåđşŏń

"Fully half the quotations found on the internet are either mis-attributed, or outright fabrications." - Abraham Lincoln

SteveMT's picture

My headline is better, IMO

I also did a search, and because the headlines were so different, nothing matched.
Lastly, there are 3-4 similar stories today about the Obama BC, so I felt that there was nothing wrong with letting this story ride awhile.

Thanks for letting me know.

Nothing to see here....

Move along plox.... just on the other side of the curtain ..... thats it .... good, gooood.

≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈ ≈
"Those who make peaceful revolution impossible will make
violent revolution inevitable."
John F. Kennedy

We need a little doggie.

We need a little doggie.

And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our lives, our fortunes and our sacred honor.

SteveMT's picture

...like Toto to pull back the curtain.

His real name is Ron Paul.