Business

Fed paid record profit to Treasury

WASHINGTON — The Federal Reserve said 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 bank’s 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 regularly throughout the year, Thursday’s report does not affect the imminent arrival of the debt ceiling.

Advertisement

As part of its campaign to stimulate the economy, the Fed over the past 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.

Get Talking Points in your inbox:
An afternoon recap of the day’s most important business news, delivered weekdays.
Thank you for signing up! Sign up for more newsletters here

Because the Fed mostly holds debt issued by the federal government, its profits — $91 billion in 2012 — are largely payments from the government.

Some conservative politicians say this back-and-forth — and the Fed’s broader efforts to reduce interest rates — are worsening the government’s fiscal problems by making debt seem less onerous and spending cuts seem less necessary.

The Fed’s chairman, Ben S. Bernanke, and other Fed officials note that the purchases have their own purpose, to stimulate the economy, and will not continue indefinitely. They also note that Congress is responsible for its own behavior.

New York Times