The Federal Reserve is bleeding money and losses are mounting.
So, what does this mean? Is the central bank in danger of going under?
Hardly.
In fact, losing money isn’t a problem for the Fed at all. But it is a big problem for the US government.
The Fed booked a $126 billion loss in February. This was primarily due to higher interest rates. The central bank must pay commercial banks interest on reserve balances it holds for them, along with interest on reverse repurchase agreements. As the Fed raises interest rates, it increases its own interest expenses, while the interest generated by the bonds held on the balance sheet remains unchanged. Meanwhile, quantitative tightening decreases its balance sheet and reduces its interest income.
By law, most of the Fed’s net income is paid to the US Treasury. In 2022, the Federal Reserve reported a net income of $58.4, but the central bank’s net income went negative in September. It was the first operating loss since 1915.
To put February’s net loss in perspective, the largest yearly gain over the last 10 years was in 2021 when the Fed reported a $104 billion net income. In other words, February’s loss was bigger than the biggest gain in at least a decade.
This is obviously a problem for the US government, as it is a revenue loss for the Treasury. That means the huge budget deficits will grow even bigger.....+
https://eraoflight.com/2023/03/04/the-fed-is-losing-money-so-what/
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