Question

Which of the following was the largest asset category of the Fed before the crisis (January 2007)?

• A. Government and agency securities
• B. Gold certificates
• C. Loans to depository institutions
• D. Federal Reserve notes
• E. Depository institution reserves

Answer 1

As of January 2007, about one-third of the funds were Treasury funds, which hold worth $1.95 trillion almost exclusively government debt and government-backed agency debt. The largest asset classes included government debt and governmentbacked agency debt ($585 billion), repurchase agreements ($390 billion), bank backed agency debt ($585 billion), repurchase agreements ($390 billion), bank obligations ($297 billion), and other assets ($45 billion).

Hence, Government and agency securities was the largest asset category of the Fed before the crisis (January 2007).

The correct answer is Option A (Government and agency securities).