Even as both the Fed and Wall Street are gripped by a raging debate over when, how and how much the Fed should shrink its balance sheet, most appear to be ignoring the $2.1 trillion elephant in the room: the fact that every incremental increase in the Fed Funds rate (also an increase in the Interest On Excess Reserves, or IOER, currently at 1.25%) is a handout to US commercial banks, but that the direct recipient of this explicit Fed subsidy are a substantial number of foreign banks.
Here are the numbers:
as of the week of July 5, there were $2.1 trillion in reserves (of which the vast majority is “excess”), the largest liability by far on the Fed’s $4.5 trillion balance sheet (currency in circulation is the other major component and amounts to $1.5 trillion).
as of the latest Fed rate hike, IOER is 1.25%
Putting these together, means that as of this moment, assuming no more rate changes, Janet Yellen will pay out $27 billion in interest on reserves parked with the Fed every year.
This much is known. What is less known, however, is the holding composition of these reserves, i.e., which banks have parked these $2.1 trillion in reserves with the Fed. Courtesy of the Fed’s H.8 statement, however, we can quickly figure out.
Recall that as we showed first all the way back in 2011, the total cash on the books of commercial banks with operations in the US tracks the Fed’s excess reserves almost dollar for dollar. More importantly, the number is broken down by small and large domestic banks, as well as international banks. It is the last number that is of biggest interest, because now that Congress is finally scrutinizing the $4.5 trillion elephant in the room, i.e., the Fed’s balance sheet, it may be interested to know that approximately 40%, or $838 billion as of the latest weekly data, in reserves parked at the Fed belongs to foreign banks.
German special commandos have arrested several people in connection with the theft of a large gold coin that was stolen from the Bade museum in Berlin back in March in a brazen theft that shocked the public.
While Reuters didn’t say whether police recovered the coin – there was some speculation that the thieves would’ve melted it down for the gold – photographs did show police leading away a suspect, whose face was covered to hide his identity. The arrests were made in the Neukoelln area of Berlin
“We are at the moment conducting searches and executing arrest warrants in several places in Berlin concerning the break in at the Bode museum in March,” said Berlin police.
The brazen theft involved entering through a museum window, possibly with the use of a ladder then making off with the 100 kilogram (equal to about 220 pounds) gold coin, according to Reuters.
he museum says the coin, known as “Big Maple Leaf,” is in the Guinness Book of Records for its purity of 999.99/1000 gold. It has a portrait of Queen Elizabeth II on one side and maple leaves on the other, and was minted by the Royal Canadian Mint.
The Canadian coin has a face value of about $1 million, but if it were melted down, the materials would be worth $4.5 million.
The coin, 53 centimeters in diameter and 3 centimeters thick, even made it into the Guinness Book of Records for its unrivalled degree of purity. It was loaned to the Bode Museum in December 2010. During the theft, Spokesman Stefen Petersen said thieves apparently entered through a window about 3:30 a.m. Monday, broke into a cabinet where the “Big Maple Leaf” coin was kept, and escaped with it before police arrived.’
The Bode has one of the world’s largest coin collections with more than 540,000 items.