The Federal Reserve Is a Money-Making Enterprise
The Federal Reserve is a money-making enterprise.
This probably shouldn’t come as any surprise, given that the central bank can create money out of thin air and buy yielding assets. Still, the Fed rakes in a staggering amount of money.
The central bank recently released its unaudited preliminary financial statement for 2021.
The Fed’s total net income for 2021 came in at $107.8 billion.
How does that compare to a legitimate business?
Apple booked a pretax income of $109 billion in its fiscal year 2021. So, the Fed rakes in nearly the same income as Apple.
The Fed’s total Revenues for the year came in at $123.1 billion. Here are the sources of that “income” courtesy of WolfStreet.
- $122.4 billion in interest received on its holdings of securities, mostly Treasury securities and MBS that it purchased as part of its QE.
- $275 million in net income from its pandemic era emergency programs that are being unwound, such as the corporate bond and bond ETF holdings that it sold by November 2021.
- $457 million in fees from services, mostly paid by the banks.
By the way, the Fed does not pay taxes. But it does remit nearly all of its net income to the US Treasury. This is required by law.
But don’t worry, plenty of people still get a cut of the pie before the Fed sends all that cash over to the federal government. The Fed paid $583 million in statutory dividends to the shareholders of the 12 regional Federal Reserve Banks.
Bankers also got a nice cut. The Fed paid $5.3 billion in interest on the reserves it holds for banks. It pays interest at a 0.15% rate on cash deposited by banks.
Here are some of the other big expenses paid by the Federal Reserve, again courtesy of WolfStreet.
- $1.9 billion in foreign currency revaluation losses
- $414 million in interest paid to counterparties of its reverse repos.
- $1 billion in costs related to producing, issuing, and retiring currency (the paper dollars).
- $5.3 billion in operating expenses of the 12 regional Federal Reserve Banks, including the salaries of the luminary traders that run these FRBs.
- $970 million in expenses of the Board of Governors (the federal agency, of which Powell is the chair)
- $628 million to fund the Consumer Financial Protection Bureau.
After all of that, Uncle Sam’s cut was $107.4 billion. That was the highest level since 2015.
The lesson – there is big money in central banking. Nice work if you can get it.
But you can’t.