Federal Reserve limited liability companies created to respond to strains in financial markets have reduced by hundreds of billions of dollars the amount of agency securities the Fed acquired through open market operations.
Agency debt securities holdings in 2011 decreased by $45 billion, and agency mortgage-backed securities holdings decreased by $156 billion.
In contrast, holdings of U.S. Treasury securities increased by $683 billion and the balances held under central bank liquidity swap arrangements increased by $99.7 billion.
The figures are part of the Federal Reserve System's 2011 combined comparative audited financial statements released Tuesday.
The statements show the Federal Reserve Banks' 2011 net income of $77.4 billion was derived primarily from $83.6 billion in interest income on securities acquired through open market operations, including federal agency and government-sponsored enterprise mortgage-backed and debt securities, as well as Treasury securities.
Total Reserve Bank assets as of Dec. 31, 2011, were $2.919 trillion, which represents an increase of $491 billion from the previous year.
The Reserve Banks provided for payments of $75.4 billion of their 2011 net income to the U.S. Treasury.
Federal Reserve Bank assets related to credit and liquidity programs decreased by $95.8 billion. The closing of the American International Group Inc. recapitalization plan in January 2011 resulted in asset reductions of $47 billion, inclusive of the full repayment of the revolving line of credit with AIG in the amount of $20.6 billion and the redemption or sale of the Federal Reserve Bank of New York's preferred interests in two AIG-related LLCs in the amount of $26.4 billion.
Investments held by the LLCs consolidated by the Federal Reserve Bank of New York decreased by $33 billion, primarily as a result of asset sales and maturities, and these proceeds were used to repay $32.3 billion of the loans extended by the FRBNY to the LLCs. In addition, loans outstanding under the Term Asset-Backed Securities Lending Facility decreased by $15.8 billion, as a result of principal payments and loan prepayments.
The combined annual financial statements include information about the assets and income of each of the consolidated LLCs, such as overall financial results, portfolio composition, asset quality, and asset value information. The statements also contain summaries of the associated credit and market risks for each significant holding.
