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Fed Pays Record $88.9B to Treasury after Earning Interest Income

The ""Federal Reserve"":http://www.federalreserve.gov announced it paid a record $88.9 billion to Treasury in 2012.

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In 2011, the Fed distributed $75.4 billion to Treasury. The previous record amount was for $79.3 billion in 2010, according to the Fed.

The earnings are from Fed programs that were introduced to stimulate the economy and involve the purchase of billions in mortgage-backed securities (MBS) each month to keep interest rates down. Currently, the Fed ""buys $40 billion"":http://dsnews.comarticles/fomc-adopts-familiar-looking-stimulus-plan-2012-09-13 in MBS each month and $45 billion in Treasury purchases.

Out of the estimated net income of $91 billion for 2012, the Fed reported $80.5 billion came from interest income on purchased securities, such as Treasury securities and GSE mortgage-backed securities (MBS).

As a policy, residual earnings of Fed banks go to Treasury after certain costs are provided such as operations.

About Author: Esther Cho

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