It looks like the participants on this forum have moved on to other things, this discussion of arcane financial issues not being quite as emotionally invigorating as other things discussed here. But I thought I'd provide just a little more information, just incase someone new stumbles into this thread and doesn't get enough information to understand what the subject is about.

The subject was central bank liquidity swaps and the initial allegation was that hundreds of billions of dollars were misappropriated by the Federal Reserve in the dark of night and with no one knowing exactly where the money is.

Central bank liquidity swaps involve two transactions. When a foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve.

When the foreign central bank lends the dollars it obtained by drawing on its swap line to institutions in its jurisdiction, the dollars are transferred from the foreign central bank's account at the Federal Reserve to the account of the bank that the borrowing institution uses to clear its dollar transactions. The foreign central bank remains obligated to return the dollars to the Federal Reserve under the terms of the agreement, and the Federal Reserve is not a counterparty to the loan extended by the foreign central bank. The foreign central bank bears the credit risk associated with the loans it makes to institutions in its jurisdiction.

The foreign currency that the Federal Reserve acquires is an asset on the Federal Reserve's balance sheet. The dollar value of amounts that the foreign central banks have drawn but not yet repaid is fully reported in the financial records maintained by The Federal Reserve. Because the swap will be unwound at the same exchange rate that was used in the initial draw, the dollar value of the asset is not affected by changes in the market exchange rate. The dollar funds deposited in the accounts that foreign central banks maintain at the Federal Reserve Bank of New York are a Federal Reserve liability. The foreign central banks generally lend the dollars shortly after drawing on the swap line.

When a foreign central bank draws on its swap line to fund its dollar tender operations, it pays interest to the Federal Reserve in an amount equal to the interest the foreign central bank earns on its tender operations. The Federal Reserve holds the foreign currency that it acquires in the swap transaction at the foreign central bank (rather than lending it or investing it in private markets) and does not pay interest.

The Federal Reserve Board issues a weekly release that includes information on the aggregate value of swap drawings outstanding. With the onset of the Global financial crisis of 2008–2009 and the collapse of Lehman Brothers on September 15, 2008, the balance grew rapidly. As of April 2009 the balance was $293,533 million. Central bank liquidity swaps have maturities ranging from overnight to three months.
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So let's cut to the chase here. A half trillion dollars was never "missing" from the Federal Reserve. Nor was it stolen away in the dead of night. These transactions were authorized by the Federal Open Market Committee and were executed for the purpose of providing liquidity in U.S. dollars in foreign markets, nothing more, nothing less. The only "risk" incurred by the Fed is that the foreign central bank who is the counterparty to the liquidity swap would fail to return the U.S. dollars held in their institution back to the Fed in New York, a highly unlikely occurrence. The transactions are all properly recorded and the money fully accounted for, even though the Chairman of the Federal Reserve might not be intimately familiar with all of the swap transactions executed with all of the foreign central banks with whom the U.S. maintains relationships.

Hopefully, with this additional information we can now all get on with bashing one elected official or another, or one legislative bill or another--all far more satisfying emotional exercises.