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How can we buy shares of the Fed ?
- Thread starter SNBthetrue
- Start date
Quote from Tresor:
No doubt they can use tricks, like any other corporation. In general what you can do with your net profit is:
(i) keep it as retained earnings (that increase your equity),
(ii) pay out as a dividend,
(iii) both of the above.
The FED consolidated statements show their solvency ratio is below 3% (which is dangerously low for a company of this type). They should not pay dividend untill they reach +7%.
Just my two cents.
Can you quote the parts of the Fed's statements that show the solvency ratio you are quoting?
Quote from krazykarl:
Can you quote the parts of the Fed's statements that show the solvency ratio you are quoting?
I am not quoting the solvency ratio. I simply calculated it based on FED consolidated statements. You can do it by yourself as well. The formula for the basic solvency ratio is:
Equity / total liabilities.
It is very simple.
Quote from krazykarl:
Then you need to analyze not-for-profit companies, though being a financial analyst you likely analyze for-profit companies, as that's how your firm makes money.
Also you might want to hit your firm's continuing education dept. up for some grammar lessons. =)
I hope you are not going to crucify my for not being a good speaker and writer in English.
Quote from Tresor:
I am not quoting the solvency ratio. I simply calculated it based on FED consolidated statements. You can do it by yourself as well. The formula for the basic solvency ratio is:
Equity / total liabilities.
It is very simple.
My math shows they are ~102% capitalized. I would expect a central bank to not have very much excess capital that's not working somewhere.(swap agreement, loan, etc.)
http://www.federalreserve.gov/Releases/H41/Current/
Also note that you might want to re-read my posts about the dividend. The purpose is not to pay out a dividend for profit sharing. You might be under the incorrect assumption that the shares of the fed frequently change in value. The change is yearly and it's nominal with inflation and other regulatory costs. It's not like owning stock in a public company where speculators can drive up the price of shares and the real-worth of that dividend changes. The shares in this case are like buying membership to a private country club. The cost of the shares gets you a legal stake in how things work, but only a stake, not control.
Quote from krazykarl:
My math shows they are ~102% capitalized. I would expect a central bank to not have very much excess capital that's not working somewhere.(swap agreement, loan, etc.)
Then I will not argue about your math abilities. Instead tell me what is your definition of ''being capitalized'', becuse if your ''capitalization'' equals ''solvency'' then by simple logic equity should not be a higher value than total liabilites (equity is a part of liabilities; ewuity is a liability of the company towards shareholders).
Or perhaps by ''capitalization'' you mean ''valuation''? Then please give me your formula for calculatiing FED's value.
Quote from Tresor:
Then I will not argue about your math abilities. Instead tell me what is your definition of ''being capitalized'', becuse if your ''capitalization'' equals ''solvency'' then by simple logic equity should not be a higher value than total liabilites (equity is a part of liabilities; ewuity is a liability of the company towards shareholders).
Or perhaps by ''capitalization'' you mean ''valuation''? Then please give me your formula for calculatiing FED's value.
I don't mean valuation at all - this is not a public company with a monetary value. The Fed, for all intents and purposes, like most NPOs, doesn't have equity. If you're determined to keep analyzing this in terms of "equity" then the US treasury is the majority shareholder by an extremely margin, with member banks having inconsequential allocations of stock.
I calculated their capitalization by taking assets / liabilities. Again, this is not a public for-profit company that has a concept of "equity" by-which the equity owners get profits. This is an NPO.
Quote from krazykarl:
My math shows they are ~102% capitalized. I would expect a central bank to not have very much excess capital that's not working somewhere.(swap agreement, loan, etc.)
http://www.federalreserve.gov/Releases/H41/Current/
Also note that you might want to re-read my posts about the dividend. The purpose is not to pay out a dividend for profit sharing. You might be under the incorrect assumption that the shares of the fed frequently change in value. The change is yearly and it's nominal with inflation and other regulatory costs. It's not like owning stock in a public company where speculators can drive up the price of shares and the real-worth of that dividend changes. The shares in this case are like buying membership to a private country club. The cost of the shares gets you a legal stake in how things work, but only a stake, not control.
You changed this post after I have answered it.
Go to point 10 of the link you submitted: http://www.federalreserve.gov/Releases/H41/Current/
''10. Consolidated Statement of Condition of All Federal Reserve Banks'' as of 9 Dec 2009
(in millions)
Total liabilities 2,137,435
Total capital (eg. equity) 52,152
Ergo the solvency ratio is 2.44%. Minimum requirement in EU for any bank is something around 7 - 9%. If it is less then such a bank is declared bankrupt under the banking law.
How come you think the capitalization is 102%? And what do you mean by capitalization?