Fed’s Remittances to U.S. Treasury Decline to $79.6 Billion

The Federal Reserve said remittances it pays to the U.S. Treasury fell to $79.6 billion last year from a record $88.4 billion in 2012.

Interest income on securities purchased in open-market operations, including Treasuries, government-sponsored enterprise debt and mortgage-backed securities, rose to $90.4 billion, an increase of $9.9 billion over the previous year, the Fed said today in its 2013 combined annual financial statements released in Washington.

After paying for its own expenses and making capital adjustments, the Fed returns the remainder of its earnings to U.S. taxpayers. Remittances to the federal government are continuing as policy makers press on with their quantitative easing program, in which the Fed buys bonds to reduce lending costs to support the economy and boost hiring.

The large-scale asset purchases increased total assets held by the Fed by $1.1 trillion last year to $4 trillion as of Dec. 31. The balance sheet this week rose to a record $4.18 trillion, according to a report released yesterday.

The policy-setting Federal Open Market Committee has pared the pace of monthly bond buying to $65 billion a month from $85 billion in December. The FOMC meets again next week.

Interest income from Treasury securities rose to $51.6 billion last year from $46.4 billion in 2012, while interest on mortgage-backed securities increased to $36.6 billion from $31.4 billion, the Fed said today.

The central bank provided the figure as part of its annual audited financial statements.

Quick Jump

Former Fed Chairman Ben S. Bernanke testified to lawmakers in February 2013 that remittances to the government probably will continue, unless there is a rapid jump in interest rates. The FOMC has kept the main rate near zero since December 2008.

“If interest rates rise very quickly then there may be a period where we don’t pay any remittances at all to the Treasury,” Bernanke said to the House Financial Services Committee. “Under most, and I would say virtually all scenarios, we will be sending remittances to the Treasury that are substantially higher than the norms before the crisis.”

Bernanke, whose term ended Jan. 31, told lawmakers in May the Fed may let assets on its balance sheet mature rather than selling them during an exit from record monetary easing.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE