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The Fed Balance Sheet: What Is Uncle Sam's Largest Asset?

June 11, 2015

by Doug Short

Note: We've updated the quiz based on today's Q1 Financial Accounts of the United States (previously referred to as the Flow of Funds Accounts). Hint: The correct answer is the same as it was for the last quiz.


Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset on Uncle Sam's balance sheet of financial assets?

  • A) U.S. Official Reserve Assets
  • B) Total Mortgages
  • C)Taxes Receivable
  • D) Student Loans

The correct answer, as of the latest quarterly data, is ... Student Loans.

The rapid growth in student debt has been an ongoing topic in the financial press. A stunning chart that continues to haunt us illustrates the rapid growth in federal loans to students since the onset of the great recession. The chart is based on the Federal Reserve's Financial Accounts data (available here) for government's assets and liabilities. We've used a log-scale vertical axis.

For a more dramatic look at the same data, here it is with a standard linear axis.

As we point out on the chart, the two callouts are for Q4 2007, the quarter in which the Great Recession began (December 2007) the most recent quarter on record, Q1 2015. The loan balance has risen and astonishing 662 percent over that timeframe, most of which dates from after the recession.

This chart only includes federal loans to students. Private loans increase the debt burden. The Federal Reserve Bank of New York regularly tracks household debt and credit. In their most recent update, they calcuate student load debt to be $1.16 trillion at the end of 2014.

But back to our quiz. Student loans may be a liability on the consumer balance sheet, but they constitute an asset for Uncle Sam. Just how big? It's 48.5 percent of the total Federal assets. This is about 7.5 times larger than the 6.5 percent for the Total Mortgages outstanding and 5.0 times the size of Taxes Receivable at 9.7%.

Of course, assets are, sadly, the trivial side of Uncle Sam's Financial Accounts balance sheet -- about 1.82 Trillion. The liability side totaled 17.07 Trillion at the end of Q1.

As of yesterday's close, the S&P 500 was 1.2% off its all-time high. However, the student loan bubble, the biggest slice in Uncle Sam's asset pie, will haunt us for many years to come.


Closing note: For a fascinating slide set on student debt, see this presentation (PDF format) by Donghoon Lee, a Senior Economist at the Federal Reserve Bank of New York.