Fed Transferred $79.6 Billion in Earnings to the Treasury Last Year

[steve2470]

http://www.nytimes.com/2014/03/15/business/economy/fed-transferred-79-6-billion-in-earnings-to-the-treasury-last-year.html?_r=0

WASHINGTON — The Federal Reserve paid $79.6 billion to the Treasury Department in 2013 as the Fed’s enormous investment campaign to stimulate economic growth continued to generate windfall profits for taxpayers.

Since 2008, the Fed has expanded its holdings of Treasury and mortgage-backed securities from less than $1 trillion to more than $4 trillion in an effort to suppress interest rates and encourage risk-taking.

Its earnings from those holdings have increased apace. The Fed, required by law to put most of its profit in the government’s coffers, has contributed almost $323 billion in the last four years. The Fed invests exclusively in federal government bonds, so its profits come from lending to the Treasury. In returning the money, it is effectively reducing the government’s borrowing costs.

Some Republican politicians argue that the Fed, by reducing the short-term cost of borrowing, is enabling the growth of the federal debt. Fed officials respond that Congress itself is responsible for making those decisions — and that abandoning the policy would be counterproductive, in all likelihood.

[Wilms]

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