From the Finan­cial Times Alphav­ille blog:

The Fed’s run out of money

Seri­ously. It’s broke. Here’s the state­ment from the US Treasury:

The Fed­eral Reserve has announced a series of lend­ing and liq­uid­ity ini­tia­tives during the past sev­eral quar­ters intended to address height­ened liq­uid­ity pres­sures in the finan­cial market, includ­ing enhanc­ing its liq­uid­ity facil­i­ties this week. To manage the bal­ance sheet impact of these efforts, the Fed­eral Reserve has taken a number of actions, includ­ing redeem­ing and sell­ing secu­ri­ties from the System Open Market Account portfolio.

The Trea­sury Depart­ment announced today the ini­ti­a­tion of a tem­po­rary Sup­ple­men­tary Financ­ing Pro­gram at the request of the Fed­eral Reserve. The pro­gram will con­sist of a series of Trea­sury bills, apart from Treasury’s cur­rent bor­row­ing pro­gram, which will pro­vide cash for use in the Fed­eral Reserve initiatives.

Announce­ments of and par­tic­i­pa­tion in auc­tions con­ducted under the Sup­ple­men­tary Financ­ing Pro­gram will be gov­erned by exist­ing Trea­sury auc­tion rules. Trea­sury will pro­vide as much advance noti­fi­ca­tion as pos­si­ble regard­ing the timing, size, and matu­rity of any bills auc­tioned for Sup­ple­men­tary Financ­ing Pro­gram purposes.’’

The upside? Ha, don’t be silly, no upsides today. But at least the flight to safety means that the government’s only going to be paying 0.2% in inter­est for all the new money it’s printing.

The super-​scary down­side? It now costs 0.3% a year to insure your­self against the U.S. gov­ern­ment default­ing on its debts, which means that the CDS mar­kets now believe that a default on its oblig­a­tions by the U.S. gov­ern­ment is now 15 times more likely than it was a year ago.