Credit & Capital

Fed Sends Record $97B in Profits to Treasury

The U.S central bank had $4.5 trillion in assets at the end of 2014, compared with $850 billion in 2008.
Matthew HellerMarch 23, 2015
Fed Sends Record $97B in Profits to Treasury

The Fed continues to get fatter. According to annual financial data released Friday, the U.S. central bank ended 2014 with nearly $4.5 trillion in assets — up from about $4 trillion in 2013 — and remitted a record $96.9 billion in profits to the U.S. Treasury.

The Federal Reserve Banks’ balance sheet has been swollen by the bond-buying program, or “quantitative easing,” it launched to boost the economy during the financial crisis. It had only about $850 billion in assets in 2008.

While quantitative easing is now over, some Wall Street analysts are “concerned that the Fed may be helping blow up bubbles in the stock and bond markets because it has injected so much money into the markets through its purchases,” CNN says.

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In its financial statements for the year ended Dec. 31, the Fed reported that net income before Treasury remittances rose 28% to $101.3 billion. Remittances totaled $96.9 billion, up 27%.

Interest income on securities acquired through open market operations totaled $115.9 billion, an increase of 28% from the previous year, while interest expense on depository institutions’ reserve balances was $6.9 billion, up 32%.

“The Fed’s balance sheet may not shrink too dramatically just yet,” CNN predicts. “That’s because the central bank has said that it will continue to reinvest the principal payments from all of its holdings for awhile.”

Fed Chair Janet Yellen told reporters Friday that the central bank will eventually end its investments in bonds but not until “economic conditions were appropriate after we begin raising [interest] rates.” Earlier, the Fed said it had not decided on when to raise rates, choosing to continue keeping a close eye on the economy before it takes the plunge.

Among the Fed’s assets, holdings of U.S. Treasury securities increased by $237 billion, and federal agency and GSE mortage-backed securities holdings increased by $255 billion. GSE debt securities holdings decreased by $19.1 billion. Asset holdings of Maiden Lane LLC, the vehicle established to hold the assets of bailed-out companies, totaled $1.8 billion on Dec. 31, 2014.

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