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Fed paid record US$98.7b to USTreasury in 2014

Saturday, January 10, 2015 - 00:32

[WASHINGTON]The regional Federal Reserve banks turned over a record US$98.7 billion in profits to the U.S. Treasury in 2014, essentially recycling the earnings the central bank gets from the US$4 trillion in securities it accumulated through three rounds of quantitative easing.

The figure tops the US$79.6 billion that the Fed's 12 regional banks paid back to the US government in 2013 and the US$88.4 billion paid in 2012.

The Fed earns interest on US Treasury bonds and other US agency securities it purchased to battle the financial crisis.

There has been concern that the Fed could face annual losses - and a political backlash because of it - as the crisis fades and interest rates rise.

Central bank plans to control future interest rates by increasing the amount it pays to banks for their excess reserve holdings means the Fed's expenses could increase dramatically in coming years. In addition, if the Fed were to sell its asset holdings before they mature it could face losses if it did so in an environment where it was also raising interest rates.

The 2014 payment, however, should assuage those worries. A Fed study last year concluded there was little chance the Fed would lose money on its operations.

REUTERS