viernes, 16 de enero de 2015

viernes, enero 16, 2015
Review & Outlook

The Fed Cash Machine

The central bank kicked in $98.7 billion to the Treasury last year.

The Obama Administration has been a stalwart supporter of the Federal Reserve’s bond purchases, and one underreported reason appeared in a Fed press release on Friday: The central bank has become a huge money-maker for the Treasury.

The Fed disclosed in preliminary unaudited results that its Reserve Banks turned over no less than $98.7 billion to the Treasury in 2014. Most of that is interest income from the Fed’s purchase of bonds under its various quantitative easing programs that have expanded its balance sheet to $4.5 trillion or so in assets.

That’s the biggest annual windfall since QE began amid the financial panic, and an increase from $79.6 billion in 2013. In the six years since 2009, the Fed has contributed a remarkable $468.8 billion to Treasury. The pre-crisis Fed usually kicked over something to the government from its open-market operations, but QE has made it one of Treasury’s largest single revenue sources.


A detail from the front of the United States Federal Reserve Board building is shown in Washington October 28, 2014. Reuters 

For perspective, the entire federal budget deficit for fiscal 2014, which ended in September, was $483 billion. Without the Fed’s windfall, it would have been nearly $100 billion more.

Corporate income tax revenue in 2014 was $321 billion, so the Fed turned over nearly 30% of the amount provided by every American corporation.

Treasury is spending the Fed’s windfall, naturally, which means that when the QE boom ends the country will have to spend that much less or find the revenue somewhere else. The danger is that politicians are getting used to the money, which is one more reason for the Fed to begin winding down its balance sheet sooner rather than later.

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