President Paul? Wall Street on high alert

In fact, the Fed has $4.5 trillion in assets, mostly Treasury bonds and mortgage-backed securities guaranteed by the Federal government. It has only $57 billion in equity because it sends most of its profits to the U.S. Treasury, a total of around $500 billion over the past decade.

And it actually has no “leverage” in the traditional sense of the word because it does not borrow money like Lehman Brothers did before it went bankrupt. Instead, the Fed creates money, as all central banks do.

“The capital of a central bank has very little importance relative to a private institution. The deposits cannot run. They are created by the central bank through asset purchases,” said Donald Kohn, a former Fed vice chairman now at the Brookings Institution. “There is essentially no credit risk on the Federal Reserve’s balance sheet right now, and I don’t know of any institution in the United States that is subject to more oversight.”