By Jonathan Spicer
March 15 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
While the Fed has never missed an annual payment, some
policymakers 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.
On Friday, Fed officials said the 2012 financial statements
told a positive story, and demonstrate that the central bank
remains a responsible steward of taxpayer resources.