Finally, It’s The Fed That Has Become Too Big To Fail

We’re still not sure whether CNBC was making a joke or simply advertising its ignorance with a recent headline, “Accounting Tweak Could Save Fed from Losses,”   This was a tweak about as subtle and ingenuous as Bernie Madoff’s balance sheet.  What the central bank did was revise and advantage its own rules so that if some financial catastrophe were to inflict huge losses on the Federal Reserve System, the U.S. Treasury would take the hit, not the Fed itself.  Oh, and taxpayers needn’t be concerned about the presumptuousness of this coy arrangement, since the changes provide for the Fed to pay back the losses with future profits.  Do we really need to point out to CNBC et al. that any such profits would have to come almost entirely from…interest income on Treasury bills, bonds and notes held by the Fed?

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