Bernanke’s legacy: Fed set to lose $500 billion

Economists predict that the US Federal Reserve could lose half a trillion dollars in just three years thanks to policies enacted by the central bank under Chairman Ben Bernanke.

A study conducted by investment analysts at New York City’s MSCI Inc. suggests that Mr. Bernanke’s efforts to keep the floundering economy in tact on the heels of a recession have proven to be futile and will continue to collapse.

According to Bloomberg News, who contracted MSCI to conduct the study, the potential losses the Fed could see during the next three years are “unprecedented.” MSCI says the market values of Fed holdings are likely to shrink by $547 billion during that span.

The group says they concluded as much after using stress-test scenarios designed by the central bank to examine how the value of securities held in the Fed’s portfolio at the end of 2012 will stand up during the next few years. In a situation involving economic contraction and rising inflation, MSCI expects the Fed’s holdings to drop drastically by more than half of a trillion dollars.

Should conditions improve, however, losses may not amount to that substantial of a figure. If the economy performs “in line with consensus forecasts of gradually rising growth, inflation and interest rates,” reports Bloomberg, the mark-to-market loss during the next few years could amount to ‘only’ $216 billion. Sarah Binder, a senior fellow at the Brookings Institution, tells Bloomberg that either way she expects a hostile response from Washington.

found @ http://rt.com/usa/federal-reserve-trillion-loss-565/