US Central Bank credit has increased 1.075trillion (End 2008 to 1 May 2013) and reserve balances with the Federal Reserve have increased 958bn over the same time frame – source data H8 and H4.1 reports of the Federal Reserve.
On the face of it, given that the Federal Reserve credits each bank’s reserve account for the purchase price of securities on the open market, little (or no) QE money has leaked into the system. It would appear that we have a straight swap between assets and reserve cash balances on bank’s balance sheets.
But, commercial bank liabilities have grown 794bn and loans and leases (assets) by only 108bn. Commercial banks (to 1 May 2013 from the end of 2008) have increased their security holdings by 631bn and are assumed to have sold 958bn of securities (the increase in reserve balances) so they will likely have bought 958bn + 631bn, or 1.589 trillion in the market place over the period and sold most of this.
Is it not possible that some of the QE may have been used to fund asset purchases prior to sale (just a thought)? If this is the case, some QE will have found its way into “portfolios”, then back into the banking system and back into reserve accounts at the Federal Reserve. If it has found its way into portfolios it also likely have impacted asset prices.
But, I cannot tell from the Federal Reserve accounts themselves exactly what has happened and I do not know enough about the intricate details of the reconciliation to tell otherwise. I have looked at the weekly drawdown in the reserve accounts over the period end 2008 to May 2013 and these total some 2.7trn USD – again, I do not know enough about the workings of these accounts to assess the significance (most of these transactions may just be open market sales of securities and therefore reverse reserve transactions), but I am flagging a grey area for me.