Profits on the Federal Reserve’s balance sheet, which are handed over to the Treasury, were down 36 percent in the first quarter of 2013 from a year earlier, as the central bank’s interest income dropped.
The Fed returned $15.3 billion to the Treasury so far this year, down from $23.8 billion in the same period last year. The results were disclosed in the Fed’s unaudited quarterly financial report released in Washington.
Fed Chairman Ben Bernanke has expanded the central bank’s balance sheet to a record $3.4 trillion through three rounds of large-scale asset purchases designed to lower the 7.5 percent unemployment rate and reverse the damage from the longest and deepest recession since the Great Depression.
The central bank receives interest payments on its holdings of government securities and mortgage debt. This income is used to fund the operations of the Fed’s board of governors and 12 regional reserve banks and the remainder returned to the Treasury. The Fed said it had set its budget for all of 2013 at $5.07 billion.
Net interest income in the first three months declined to $18.3 billion from $19.9 billion a year ago, led by a drop in income on the central bank’s holdings of housing debt.
Last year, the Fed remitted a record $88.4 billion to the U.S. Treasury.
The central bank estimates that its profits are likely to dwindle and may disappear in coming years as interest rates rise. In January, a group of Fed economists estimated remittances to the Treasury could fall to zero for about four years under a baseline scenario in which rates rise gradually. Under a more aggressive interest-rate increase scenario, remittances could be halted for about six years.
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