Tom Paine 1949
Diamond Member
- Mar 15, 2020
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It is crucial to understand that the Fed is taxed 100% on any operating profits it makes, and its “loss” is an unusual temporary operating loss. Sure, it is a loss of tax income to the U.S. Treasury — but that is a completely different animal. The U.S. Treasury handles the government checking accounts, issues bonds to pay for shortfalls in revenue, and is what people refer to when they talk about a “federal government deficit,” or deficit spending.
A good explanation here:
Fed Reports Operating Loss of $114 billion for 2023, as Interest Expense Blows Out
by Wolf Richter • Jan 12, 2024
… But losses don’t matter to the Fed. The Fed creates its own money, and so it cannot become insolvent. And its capital, which is capped by Congress, is not impacted by the losses because the Fed carries the losses as a “deferred asset” in a liability account on its balance sheet, rather than taking the losses against capital. So its “total capital” on its balance sheet has actually ticked up by $1 billion over the past 12 months to $42.8 billion.
The losses do matter to the Treasury Department though – which is no longer getting the remittances from the Fed. And so the Fed’s losses are swelling the deficit and the debt indirectly via the absence of remittances …
Since 2001, the Fed has remitted $1.36 trillion to the US Treasury. Even over the first eight months in 2022, the Fed still remitted $76 billion to the US Treasury. The remittances stopped in September when it started to lose money.
— Fed Reports Operating Loss of $114 billion for 2023, as Interest Expense Blows Out | Wolf Street
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