The Fed Balance Sheet: What Is Uncle Sam's Largest Asset?

Advisor Perspectives ^ | 6-8-2012 | Doug Short

[blam]

The Fed Balance Sheet: What Is Uncle Sam's Largest Asset?

By Doug Short June 8, 2012

(Note from dshort: I've updated the quiz based on yesterday's (Thursdays) Q1 Flow of Funds release. Hint: The correct answer is the same, just more incredible.)

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Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset on Uncle Sam's balance sheet?

A) U.S. Official Reserve Assets
B) Total Mortgages
C) Taxes Receivable
D) Student Loans

The correct answer, as of the latest Flow of Funds report for Q1 2012, is ... Student Loans.

The rapid growth in student debt has been a frequent topic in the financial press. One stunning chart that caught my attention illustrated the rapid growth in federal loans to students since the onset of the great recession. Here is a chart based on data from the Flow of Funds Table L.105, which shows the Federal Government's assets and liabilities.

As I point out on the chart, the two callouts are for Q4 2007, the quarter in which the Great Recession began (December 2007) the most recent quarter on record, Q1 2012. The loan balance has risen and astonishing 332% over that timeframe, most of which dates from after the recession.

This chart only includes federal loans to students. Private loans make up an even larger amount. Earlier this year the Consumer Financial Protection Bureau (CFPB) posted an article with the attention-grabbing title: Too Big to Fail: Student debt hits a trillion. The details of the private student loan market are not readily available, but CFPB plans to publish its study results on the topic this summer.

But back to our quiz. Student loans may be a liability on the consumer balance sheet, but they constitute an asset for Uncle Sam. Just how big? Nearly 35% of the total federal assets, over four times the 8.6% percent for the total mortgages outstanding.

Of course, assets are, sadly, the trivial side of Uncle Sam's Flow of Funds balance sheet -- about 1.36 Trillion. The liability side totaled 12.65 Trillion at the end of Q1 (details here).

Student loan debt is something we'll want to continue watching, especially when more details of the private loan market becomes available.

[blam]

The red is the Federal property.

(ahem) I wonder why they take only the centers?

[EEGator]

Thank you.

[kabar]

ahem) I wonder why they take only the centers?

LOL. I guess they want to be moderates, i.e., non-partisan.

[blam]

See the red rectangular area on the map in northwest Florida, that is 640 square mile Eglin Air Force Base. I've read, the largest military base in the world. When the 30,000 pound MOAB bomb was tested there, (I read that)only those involved with the test heard it explode.

[tbw2]

The large area locked up in federal parks, reserves and wildernesses counted as federal assets.

[MasterGunner01]

Bring back slavery and sell all Federal employees — legislative, executive, judicial — to Alaska for $!. Round them up and ship them to the ANWR where they can do something they’ve never done before; work for a living building their survival community. Once these people are located to the ANWR, they can never leave.