Last year, the regional Federal Reserve banks paid $98.7 billion in profits to the United States Treasury, which is an all-time record for the U.S. central bank. In fact, this actually tops the previous 2012 record of $88.4 billion as well as the $79.6 billion the 12 regional banks paid back to the federal government in 2013.
This signified that the Fed was recycling the earnings the central bank received from the $4 trillion in securities it had piled on during the three editions of quantitative easing. The central bank receives interest on Treasury Bonds and other agency securities it acquired in order to combat the economic collapse.
Although it may appear to be all champagne and roses, there is a concern that the Fed could actually be facing annual losses because of the potential hike in interest rates and as the national economy somewhat improves.
To circumvent this issue, the Fed is already confirming that it is controlling interest rates moving forward by raising the amount it pays to financial institutions for their enormous reserve holdings, a measure that could certainly backfire on the century-old institution. Also, if the Fed sells its asset holdings while interest rates ascend then it could additional losses.
Here is what the Wall Street Journal warned:
“While a money-losing Fed can be dealt with via central bank accounting rules, some fear political problems. Losing money to pay substantial amounts of money to private banks, many of them foreign, could be politically problematic and could subject the Fed to greater scrutiny and criticism by elected officials.”
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