ChesusRice
Well-Known Member
Actually the interest on the bonds goes back to the treasury department
WASHINGTON The Federal Reserve said on Thursday that it sent $88.9 billion in profit to the Treasury Department in 2012, a record that reflected the vast expansion of the central banks investment portfolio. The Fed is required by law to hand over a large majority of its profits, a long-standing provision that has become a lot more lucrative in recent years. Because the money is transferred at regular intervals throughout the year, Thursdays report does not affect the imminent arrival of the debt ceiling.
As part of its campaign to stimulate the economy, the Fed over the last five years has amassed $2.7 trillion in Treasury securities and mortgage-backed securities. And the central bank is still expanding its holdings by $85 billion a month.
The interest payments on those securities are the primary source of the Feds profits. The Fed has transferred a total of $335 billion to the Treasury since 2009, compared with $147 billion in the previous five years, adjusted for inflation. The Fed has transferred at least some profit to the Treasury every year since 1934.
Because the Fed mostly holds debt issued by the federal government, its profits which totaled $91 billion in 2012 are largely payments from the government. By returning that money to the government, the central bank in effect is letting the government borrow at no cost.
