Here is how the federal reserve is based itself, including renovations, without dollars of taxpayers
The funding of the federal reserve was examined while the White House reunites the renovation of the $ 2.5 billion seat for cost exceeding.
This controversy was underlined Thursday, when President Donald Trump and the president of the Fed, Jerome Powell, did not agree on the cost during a visit to the Central Bank. Trump’s allies suggested that the project could be a reason to oust Powell, but the president said that he would not dismiss him, although Trump continues to require lower rates.
Unlike Pentagon and a new system of weapons that has exploded its budget, the Fed and its operations are funded differently.
While the Ministry of Defense and other Executive Branches receive money from Congress, the Fed is self -funded, largely via interest income from the government’s titles it holds.
This means that no dollar taxpayers have been allocated to Fed operations – including construction projects such as renovation of the head office.
Most Fed revenues come from assets such as treasury obligations and titles backed by mortgages that are on the balance sheet of the central bank and gain interest.
This assessment exploded in size during the major financial crisis and the COVVI-19 pandemic while the Fed bought billions of dollars in bonds to support the economy.
Other sources of income include interest in investments in foreign currencies held by the Fed; The costs for services such as checks for checks, fund transfers and cleaning operations have been provided to the deposit institutions; and interest on loans to institutions of deposit.
Admittedly, the Fed mission is not to maximize its profits from commercial securities. Instead, he has a double mandate for stable prices and maximum employment. The purchase and sale of assets are just a way to reach these purposes.
Meanwhile, the Fed also has costs, including interest payments on reserve sales, interest payments on securities sold via buyout agreements and operating costs such as pay and its buildings. Costs increase when the Fed increases interest rates as in 2022 and 2023 to write inflation.
When income exceeds these costs, the Fed gives the excess of the Treasury department. In fact, during the decade before Covid, the Fed sent around 1 billion of dollars to the treasury.
When Fed’s costs exceed its income, the central bank creates an IOU known as a “delayed asset” to pay operations. As interest rates increased, Fed’s delayed assets increased from $ 133 billion in 2023 to almost $ 216 billion in 2024. On Wednesday, it was $ 236.6 billion.
Once the rates drops further and the income has reached the losses again, the Fed will reimburse the delayed asset, then resume to give the Treasury any excess income.
“In conclusion, the stricter monetary policy to curb inflation has led to a reduction in net income for the Fed,” said the Fed of St. Louis in an explanator in 2023. “This does not mean that the treasure must recapitalize the Fed, but rather that the Fed records a negative passive in the form of a delayed asset. This delayed asset accumulates until the Fed sees a positive net income, which should occur once the interest rates on long -term assets are owned to exceed the interest paid on bank reserves and installations of interest on long -term facilities. ”
