The largest asset on Uncle Sam's balance sheet is not U.S. Official Reserve Assets, nor Total Mortgages, nor Taxes Receivable.
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The correct answer, as of the latest Flow of Funds report for Q1 2012, is ... Student Loans.
The rapid growth in student debt has been a frequent topic in the financial press.
One stunning chart that caught my attention illustrated the rapid growth in federal loans to students since the onset of the great recession.
Here is a chart based on data from the Flow of Funds Table L.105, which shows the Federal Government's assets and liabilities.
As I 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 2012. The loan balance has risen and astonishing 332% over that timeframe, most of which dates from after the recession.
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This chart only includes federal loans to students. Private loans make up an even larger amount. Earlier this year the Consumer Financial Protection Bureau (CFPB) posted an article with the attention-grabbing title: Too Big to Fail: Student debt hits a trillion. The details of the private student loan market are not readily available, but CFPB plans to publish its study results on the topic this summer.
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? Nearly 35% of the total federal assets, over four times the 8.6% percent for the total mortgages outstanding.
Of course, assets are, sadly, the trivial side of Uncle Sam's Flow of Funds balance sheet -- about 1.36 Trillion. The liability side totaled 12.65 Trillion at the end of Q1 (details here).
Student loan debt is something we'll want to continue watching, especially when more details of the private loan market becomes available.
Footnote: For those who wonder how much the pie chart above differs from the Q4 2011 version, here's the previous version, based on the data reported in the March 8, 2012 release.
Read more from Doug Short at Advisor Perspectives >
I'm a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired by Advisor Perspectives, where I have been appointed the Vice President of Research. My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early '80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn't refuse. Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006. My interest in economics and financial planning was triggered by the bear market of 1973-74. My wife and I bought our first home in August 1973, a month after our second child was born. Two months later, the Oil Embargo tripled gas prices, and I began commuting to work on a bicycle. During the decade of stagflation, I became fascinated with economics, finance, and market behavior (my wife claims it's an addiction). Charting financial data is something I've been doing for over 25 years. I was an early user of first-generation spreadsheet software (VisiCalc, SuperCalc, and Lotus 1-2-3), and I participated in the beta program for the original release of Quicken. Contrary to what many visitors assume based on my last name, I'm not a bearish short seller. It's true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool article attests. I also developed and maintain the website for the Raleigh Chamber Music Guild. Unless I've been coerced into a vacation, I'm usually hard at work in the Carolinas — Raleigh, Myrtle Beach, or shuttling between the two.
As an expert in financial analysis and economic trends, I'd like to delve into the intriguing information presented in the article about Uncle Sam's balance sheet, particularly focusing on the significant role student loans play as the largest asset. The article discusses data from the Flow of Funds report for Q1 2012, highlighting the astonishing 332% increase in federal loans to students since the onset of the Great Recession in Q4 2007.
The evidence provided includes a chart based on data from the Flow of Funds Table L.105, illustrating the Federal Government's assets and liabilities. This visual representation effectively conveys the substantial growth in student loan balances over the specified timeframe, with callouts for Q4 2007 and the most recent quarter on record, Q1 2012. This rise in student debt is emphasized further by the fact that it constitutes nearly 35% of the total federal assets, surpassing the percentages for U.S. Official Reserve Assets, Total Mortgages, and Taxes Receivable.
Additionally, the article touches upon the private student loan market, acknowledging that details are not readily available but hinting at the Consumer Financial Protection Bureau's (CFPB) plans to publish a study on the topic. Private loans are mentioned to make up an even larger amount than federal loans, adding complexity to the overall landscape of student loan debt.
Furthermore, the article contextualizes the significance of student loans as assets for Uncle Sam, surpassing the percentages for total mortgages outstanding. The author raises awareness about the potential impact of student loan debt on Uncle Sam's Flow of Funds balance sheet, given its substantial contribution to federal assets.
In conclusion, the article serves as a comprehensive analysis of the growing importance of student loans in the broader economic context, backed by concrete data and a well-presented chart. It emphasizes the need to monitor this financial trend, especially when more details about the private loan market become available, showcasing the author's depth of knowledge in economic analysis and financial trends.
