U.S. Treasury Gets Record $97.8B From Fed

The surge in the Fed's remittances to Treasury reflects in part the interest earned from its bond-buying programs to stimulate the economy.
Katie Kuehner-HebertMarch 18, 2016

Thanks in part to interest earned from its bond-buying stimulus programs, the U.S. Federal Reserve in 2015 sent a record $97.8 billion in profits to the Treasury Department.

The profit figure was released Friday as part of the Fed’s audited annual financial statements, just topping the $97.7 billion that the Fed had estimated in January. The Fed in December also made a one-time transfer of $19.3 billion from its surplus account, as required by a federal transportation bill.

Including the one-time payment, the Fed sent $117.1 billion to Treasury in 2015.

“Remittances to Treasury have grown substantially in recent years along with the size of the Fed’s portfolio of assets, which has swelled to more than $4.5 trillion since the financial crisis from less than $1 trillion before  thanks in large part to a series of bond-buying programs the Fed launched to try to stimulate the economy,” the Wall Street Journal said.

The Fed uses the revenue from interest on its bonds and other sources to cover its own operating expenses and sends the rest to Treasury to help pay the federal government’s bills.

But according to the WSJ, the Fed’s remittances to Treasury should shrink in the coming years, as the agency begins to pay banks higher interest rates on their deposits and eventually shrinks its balance sheet.

The Federal Reserve banks’ 2015 earnings, inclusive of other comprehensive income, were $100.3 billion, but the banks posted a net loss of $16.8 billion as a result of the increased amount of remittances to Treasury.

Total Reserve bank assets at year end were flat at $4.5 trillion. U.S. Treasury securities holdings fell by $15.6 billion, and federal agency and GSE MBS holdings rose by $11.4 billion. GSE debt securities holdings decreased by $6.2 billion, and Maiden Lane LLC asset holdings totaled $1.8 billion.

The Fed created Maiden Lane to purchase illiquid assets from the books of Bear Stearns during the financial crisis.