The Federal Reserve said Friday it transferred a record $96.9 billion to the U.S. treasury in 2014, profits on its unprecedented $4.4 trillion in holdings designed to support the U.S. economy in the aftermath of the Great Recession.
The Fed made public its audited financial statement for the 2014 calendar year. It actually earned $99.7 billion last year on its massive holdings of treasuries and mortgage-backed securities purchased in its aggressive bond buying from 2009 to 2014.
Under its efforts, known as quantitative easing, the Fed purchased government and mortgage bonds to dampen the interest rate on long-term bonds that influence the price of a mortgage, car loan and other big purchases. In doing so, the Fed also forced investors out of safe havens in search of better returns on risk taking. It’s one reason why the stock market has soared in recent years.
The Fed’s total assets were $4.5 trillion last year and its holdings generated $115.9 billion in interest income, the central bank said Friday, and that reflected an increase of $25.5 billion from 2013. The Fed also paid banks $6.9 billion in interest income for their balances held at Federal Reserve district banks last year.
The independent Fed, which does not rely on Congress for funding, had operating expenses of $6.1 billion in 2014. This number included $1.9 billion to run the Federal Reserve Board, currency costs and operation of the Consumer Financial Protection Bureau, created in the 2010 revamp of financial regulation.
Most of the special funds created during rescue programs amid the financial panic of 2008 were dissolved in 2014, with investors paid off. One main fund remains, called Maiden Lane LLC, and it had assets of $1.8 billion last year.
About $1.5 billion of that was in cash and short-term treasuries, required to remain in the account until the last of complex financial instruments held in Maiden Lane either reached maturity are that investors in these complex securities are finally paid off.
The Fed’s audited books were released two days after Chair Janet Yellen effectively put financial markets on notice that the central bank was readying to, likely sometime between June and September, raise its benchmark interest rate for the first time since December 2008.
It’s a sign that the economy is growing strong enough to stand on its own feet again, but also implies a move away from certainty in the projection of future interest rates and the future cost of borrowing across the economy.
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