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Research Strategy . Focus on short-term impact – Event Studies Three periods Pre-Lehman (6/1/2007 – 9/14/2008) Global Crisis I (9/15/2008 – 12/31/2008) Global Crisis II (1/1/2009 – 6/30/2009). Big Picture Take- Aways. Unwinding the Fed’s Balance Sheet. Unwinding the Fed’s Balance Sheet.
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Research Strategy • Focus on short-term impact – Event Studies • Three periods • Pre-Lehman (6/1/2007 – 9/14/2008) • Global Crisis I (9/15/2008 – 12/31/2008) • Global Crisis II (1/1/2009 – 6/30/2009)
Unwinding the Fed’s Balance Sheet Total Balance Sheet - January 4, 2007: $860 billionLiabilities:Currency: $819 billionReserves: $13 billion Assets:T bills: $277 billionT bonds: $502 billionTotal Balance Sheet - October 9, 2013: $3,711 billionLiabilities:Currency: $1,211 billionReserves: $2,359 billionAssets:T Bills: $0T Bonds: $2,088 billionMortgage-Backed Securities: $1,342 billionAgency Debt: $61 billion • So what? • Will be difficult to sell MBSs • Fed facing losses in a few years