WASHINGTON Jan 10 The Federal Reserve pumped a
record $88.9 billion into the U.S. Treasury last year, the
spoils of big profits made on its vast holdings of securities.
The U.S. central bank said on Thursday the money was earned
primarily from interest payments on the securities in its
multi-trillion dollar portfolio of U.S. government debt and
bonds related to the housing industry.
Each year, the central bank sends its earnings, minus
operating costs and other expenses, to the Treasury.
The 2012 figure eclipsed the prior record of $79.3 billion
deposited into government coffers in 2010.
The Fed estimated its net income for last year at $91
The increase in the amount of cash forked over to the fiscal
authority largely came from a profit of $13.3 billion earned on
sales of U.S. Treasury securities. That reflected the surge in
prices for U.S. government debt last year to record highs.
The Fed also earned $6.1 billion through holding companies
created in response to the fi nancial crisis that began in 2007.
The creation of those holding companies was part of a
massive bailout aimed at r estori ng confidence in the country's
banking system, which at the time was under extreme duress.
T he Fed provid ed crucial funding in the bailout, which
propped up firms like B ear Stearns and AIG hit by s piraling
losses re lated to a then-imploding ho using market. Bear Stearns
was eventually sold to JPMorgan.
T he Fed announced in June that loans made in the bailout had
been repaid with interest. Profits from the sale of remaining
Bear Stearns and AIG assets g o mainly to the central bank.
Fed transfers to the Treasury are effectively payments to
U.S. taxpayers. They have soared along with the Fed's sharp
expansion of its balance sheet via massive bond purchases t o
shore up a fragile recovery fr om the 2007-09 recession.
Fed critics, warning these actions represent a threat of
future inflation, worry the central bank may suffer losses on
its portfolio if it is forced to sell assets quickly to keep
price pressures in check. H ow ever, Fed Chairman Ben Bernanke has
played down the risk of losses.