Sam Goldfarb wrote an article in the Wall Street Journal yesterday titled “Pandemic Hangover: $11 Trillion in Corporate Debt,”  The article noted how non-financial corporate debt had risen to, “according to the Federal Reserve, about half the size of the U.S. economy.”

Goldfarb also noted that, in a May report, the Fed expressed concern that investors had “rarely” been compensated for the risk of that debt and that the Fed report concluded “vulnerabilities arising from business debt remain elevated.”

People who live in glass houses shouldn’t throw stones.

In its latest weekly consolidated balance sheet for the 12 Reserve Banks, the Fed reported $7.9 trillion in total liabilities. That’s $7.9 trillion for just one “company,” compared to the $11.2 trillion for thousands of non-financial companies discussed in that article. And the Fed’s balance sheet has mushroomed since the onset of the 2008-2009 financial meltdown, especially since the onset of the pandemic/lockdown crisis.

The Fed’s total liabilities have nearly doubled since February 2020. Before the 2008-2009 financial crisis (a crisis in which the Fed was far from blameless), the Fed’s liabilities totaled “only” about $870 billion. The Fed’s debt is now about 10 times where it was back in 2007.

Maybe the Fed should be analyzing some of the “vulnerabilities” this poses, either to itself or to the Treasury and, in turn, to U.S. taxpayers and citizens.

Bill Bergman

Director of Research

Truth in Accounting

June 15, 2021

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