Tags: Fed | Treasury | profit | government

Fed Sent Record $88.4 Billion Profit to Treasury Last Year

Friday, 15 March 2013 01:01 PM EDT

The Federal Reserve sent a record $88.4 billion in profits to the U.S. Treasury last year, audited results showed on Friday, a big payday for the government thanks to the central bank's massive bond purchases.

The income came mostly from $80.5 billion in interest on Treasury bonds and mortgage-backed securities, according to the annual financial statements audited by Deloitte. Total Fed bank assets stood at $2.9 trillion at the end of last year.

Preliminary results released in January showed profits of $88.9 billion in 2012, a year in which U.S. government bond prices hit record highs.

The central bank has in the last few years snapped up some $2.5 trillion in assets to help drag the U.S. economy from the 2007-2009 recession; unsatisfied with slow economic growth and high unemployment, it now buys $85 billion in bonds per month.

The Fed regularly transfers its profits, known as remittances, to the Treasury in what amounts to payments to U.S. taxpayers. Those profits could turn to losses in the years ahead, however, if the Fed sells assets as interest rates rise.

Central bank researchers warned in January that the Fed could miss payments to the Treasury for up to four years, and that the loss could spike as high as $125 billion in 2019, under a scenario in which securities were sold and rates were higher than expected.

While the Fed has never missed an annual payment, some policy makers fear portfolio losses in the years ahead could expose it to attacks from critics in Congress and could possibly harm its independence. The Fed could decide not to sell the assets and simply let them mature, allowing it to avoid realizing the losses.

© 2024 Thomson/Reuters. All rights reserved.


StreetTalk
The Federal Reserve sent a record $88.4 billion in profits to the U.S. Treasury last year, audited results showed on Friday, a big payday for the government thanks to the central bank's massive bond purchases.
Fed,Treasury,profit,government
281
2013-01-15
Friday, 15 March 2013 01:01 PM
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