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IPFS News Link • Federal Reserve

The Fed Is Losing Money; So What?

• https://schiffgold.com BY MICHAEL MAHARREY

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.


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