The kink in each curve captures what the FOMC has referred to as the point of “normalization” of the size of the Fed’s balance sheet—that is, the point at which the balance sheet will begin to expand again to support the underlying growth in liabilities items such as Federal Reserve notes in circulation.
Admati and others (2013b) present a related mechanism. 10  The notion that securities issued by financial institutions may provide liquidity services in a manner that potentially contributes to fragility because such securities do not have the safety and liquidity of publicly issued securities is examined in, for example, Gorton, Lewellen, and Metrick (2012); Stein (2012); and Gorton and Ordoñez (2014).