Hat tip to twist for finding this recent Tyler piece. For best results click on the headline, go to the original article and enlarge the chart in context there. Look at the last two bars and see how about $3 trillion of green “Agency Mortgage Poosl” (sic) suddenly becomes red “GSE”. Is that a typo or something real that happened a bit over a year ago? If real, that’s a heck of a lot of load shifting from bin “A” to bin “B” …
ZeroHedge (9/17 ’10): “Shadow Bank Liabilities Plunge By $700 Billion In Q2, $2.1 Trillion Year To Date”
I certainly don’t recall at the time hearing about such a big shift. Twist sends that a commenter also questioned this and Tyler responded (I think the sense is inverted) …
It was a reclassification from GSE liabilities to mortgage pools. The two should net out
From twist: That still of course begs the question, “Why?”
UPDATE (9/19 ’10) Gotcha! twist now sends this and I think she’s moved us closer to an answer. Bruce seems to be suggesting that it’s a simple shell game, with Fed’s balance sheet relieved of all those assets and FHFA conveniently “forgetting” to apply them to Fannie & Freddie.
Bruce Krasting (7/8 ’10): “Fed to GSEs – Put it on the Balance Sheet!”
This is just an accounting adjustment. But these things do matter. The terms of the Conservatorship require that the GSEs keep their balance sheets below $900 billion. So this accounting adjustment would throw the legal status of the GSEs into question. They would be in material covenant default on the Senior Preferred (Treasury Basura Preff) if this adjustment takes place. Given that all of the other securities of the Agencies are “cross defaulted” this raises the question as to the legal status of all of the publicly traded debt securities of the Agencies. I know Washington did not mean that to happen. But then again, stuff does tend to happen.