How can we buy shares of the Fed ?

[Tresor]

Quote from krazykarl:

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.

Any company can be subject to valuation. You only need to apply the correct method. The central bank in my country is state-owned, but you can easily arrive at the value of this bank using, e.g. a DCF method.

The Fed has equity and it is called capital. Same thing but differentlu called, and same accountic principles.

Quote from krazykarl:

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.

Okay, what is the holding of US Treasury in the FED? In % please + a link.

Quote from krazykarl:

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.

Then your nickname is well deserved. this is the most extraordinary formula for calculating the capitalization I ever came accross.

 

[krazykarl]

Quote from Tresor:

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

That is incorrect. you can't put equity in there - there is none. On their balance sheet when they have a line-item it means "capital" not "capital like equity, other things similar to capital, etc." They breakout everything: bonds, gold holdings, even the credit lines to AIG. Also it makes sense that they don't have a lot of capital - notice how much it changed in just a few days? That tells me they are constantly moving things around: making loans, buying debt, everything a bank should do.

 

[krazykarl]

Quote from Tresor:

Any company can be subject to valuation. You only need to apply the correct method. The central bank in my country is state-owned, but you can easily arrive at the value of this bank using, e.g. a DCF method.

The Fed has equity and it is called capital. Same thing but differentlu called, and same accountic principles.



Okay, what is the holding of US Treasury in the FED? In % please + a link.

I'm sorry but you keep missing the point: NPOs DON'T HAVE EQUITY!!!! you cannot keep putting it in where it doesn't exist. I understand you want to think of a company in terms of equity but there are company types that simply don't have it as part of their structure. Equity is NOT synonymous with capital. Equity implies ownership, capital does not and it's silly to think otherwise.

A company can have equity.

I can have capital in my wallet - it doesn't mean I have equity in anything.


I don't know the percentage, which is why I did not provide one, only that it is a majority as it being a NPO means the entity that created it has majority ownership.

 

[krazykarl]

Quote from Tresor:

Actually, it should have been calculated like this:

Total liabilities (inclusive of the equity): 2,189,587

Equity: 52,152

Solvency: 2.38%

Instead of just the cash you need to use the amount of assets: 2,189,965. I used the more generous line-item that is essentially a for-profit corps's revenue line: 2,226,722.

edit: it's been a while since I've looked at the fed's balance sheet. I hope to god they are using mark-to-market....

 

[Tresor]

Quote from krazykarl:

That is incorrect. you can't put equity in there - there is none. On their balance sheet when they have a line-item it means "capital" not "capital like equity, other things similar to capital, etc." They breakout everything: bonds, gold holdings, even the credit lines to AIG. Also it makes sense that they don't have a lot of liquid capital - notice how much it changed in jsut a few days? That tells me they are constantly moving things around: making loans, buying debt, everything a bank should do.

You do not seem to get the legal and accounting concept of equity / capital. It has nothing to do with the notion of ''liquid capital'' you introduced in your post.

Equity which has a different name ''capital'' in the sense it is used in the balance sheet of the FED is simply the liability of the company towards its owners. It is the capital given to the company by the owners http://en.wikibooks.org/wiki/Accountancy/Principles_of_Accounting + retained earnings + revaluation reserves + yet some other items that I will not discuss here.

After any company (in this case FED) is liquidated and its assets are sold the cash that remains after the company's wind-out is distributed to its owners in line with their share in capital or equity (in general; in detail it may look yet differently).

Contrary to your statement, I am very correct, for technically equity is the same as capital.

Just like a car is technically the same as an automobile. Hope this is clear.

 

[Tresor]

Quote from krazykarl:

I'm sorry but you keep missing the point: NPOs DON'T HAVE EQUITY!!!! you cannot keep putting it in where it doesn't exist. I understand you want to think of a company in terms of equity but there are company types that simply don't have it as part of their structure. Equity is NOT synonymous with capital. Equity implies ownership, capital does not and it's silly to think otherwise.

Oh boy. Rest assured one applies the same accounting principles and presents capital the same way as one does with equity.

Quote from krazykarl:

A company can have equity.

Very well.

Quote from krazykarl:

I can have capital in my wallet - it doesn't mean I have equity in anything.

Not very well. What you have in your pocket is cash. Cash is an asset (asstes is what you own / posses) that can be financed in a number of ways. It can be financed by a libility towards:
(i) you - then your cash is financed through your equity / capital, or
(ii) a bank - then your cash is financed through a bank loan, or
(iii) a state - then it means you did not pay your taxes on time and the state is your creditor,
(iv) ...... - I can think of many sources of financing the money that is in your pocket.

In your posts you completely mixed assets with liabilities - you simply see no difference between those two and that's why the whole misunderstanding arose.

Quote from krazykarl:

I don't know the percentage, which is why I did not provide one, only that it is a majority as it being a NPO means the entity that created it has majority ownership.

NY FED published the names of its 10 biggest shareholders once. US Treasury was not on the list...

Regards.

 

[krazykarl]

Quote from Tresor:

You do not seem to get the legal and accounting concept of equity / capital. It has nothing to do with the notion of ''liquid capital'' you introduced in your post.

Equity which has a different name ''capital'' in the sense it is used in the balance sheet of the FED is simply the liability of the company towards its owners. It is the capital given to the company by the owners http://en.wikibooks.org/wiki/Accountancy/Principles_of_Accounting + retained earnings + revaluation reserves + yet some other items that I will not discuss here.

After any company (in this case FED) is liquidated and its assets are sold the cash that remains after the company's wind-out is distributed to its owners in line with their share in capital or equity (in general; in detail it may look yet differently).

Contrary to your statement, I am very correct, for technically equity is the same as capital.

Just like a car is technically the same as an automobile. Hope this is clear.

You're correct about your definition of equity, but you continue to miss my point: the fed has no equity. NPOs don't have equity. Equity is not the same as capital. Technically you are incorrect.

You're trying to apply for-profit accounting to an NPO - you don't understand that you cannot do that.(At least in the US)

 

[Tresor]

Quote from krazykarl:

Instead of just the cash you need to use the amount of assets: 2,189,965. I used the more generous line-item that is essentially a for-profit corps's revenue line: 2,226,722.

edit: it's been a while since I've looked at the fed's balance sheet. I hope to god they are using mark-to-market....

Go to www.accounting_for_dummies.com Cash was never used in my calculation. Capital is not cash!!! Capital is a liability (it is presented on the opposite side of assets on the balance sheet).

Cash is an asset.

 

[Tresor]

Quote from krazykarl:

You're correct about your definition of equity, but you continue to miss my point: the fed has no equity. NPOs don't have equity. Equity is not the same as capital. Technically you are incorrect.

You're trying to apply for-profit accounting to an NPO - you don't understand that you cannot do that.(At least in the US)

Rest assured I saw thousand of balance sheets in my life. Whether you use term:
(i) capital,
(ii) equity capital, or simply
(iii) equity, and

present it along with liabilities as a source of financing your assets, you can call this financial item a ''cow&chicken'' or a ''mickey mouse'' and it will still be an ''equity'' to which you apply the very same accounting and presentation principles the whole world over!!!

Looking for a native speaker of English and an accountant or a financial analyst at the same time to explain this issue to the guy.

Someone help!!!

 

[krazykarl]

Quote from Tresor:

Go to www.accounting_for_dummies.com Cash was never used in my calculation. Capital is not cash!!! Capital is a liability (it is presented on the opposite side of assets on the balance sheet).

Cash is an asset.

Capital, in this case, is cash. It's only a liability if it needs to be paid back to someone, usually because a business closes it's doors. Again, this is an NPO and things are different.