Provided below are 3 revealing charts on FED operations over the past year...

Regards - VHF

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Chart 1: FED's Balance Sheet

The falling purple line is the Fed’s total holdings of long-term Treasuries (really holdings of Treasuries that have not been lent out to the dealers); the falling red line is the Fed’s holdings of Treasury bills; the rising green line is the financing from the Treasury supplementary financing account and the rise in bank reserve balances at the Fed; the rising blue line is the financing the Fed is providing to the global financial system. Tim Geithner has been a very busy man this year.

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Chart 2: Bank Losses vs. capital raised

The following more or less supports what some have been saying for a while — that major banks in the U.S. and the U.K. will end up being entirely nationalized before this crisis is over — but it’s still a striking way of looking at the data. The gist: Government recapitalization and other fund-raising has largely been in service of banks’ prior subprime losses, while corporate and consumer loans are just starting to hit bank balance sheets. It won’t take much to tip banks over into insolvency again.

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Chart 3: Federal Funds Rate

The Federal Reserve Board on Wednesday announced that it will alter the formula used to determine the interest rate paid to depository institutions on excess balances.

Previously, the rate on excess balances had been set as the lowest federal funds rate target established by the Federal Open Market Committee (FOMC) in effect during the reserve maintenance period minus 75 basis points. Under the new formula, the rate on excess balances will be set equal to the lowest FOMC target rate in effect during the reserve maintenance period less 35 basis points. This change will become effective for the maintenance periods beginning Thursday, October 23.

Which is an admission, basically, that the Fed lost control of the Federal Funds Rate.