The Federal Reserve released its annual income report Friday and the central bank says it will transfer approximately $98.7 billion to the U.S. Treasury, a record.
The 12 regional branches that make up the Federal Reserve System are required to turn over earnings -- minus debt payments, costs of operations, payment of dividends and other capital requirements-- to the Treasury. Considering that JPMorgan Chase, the largest bank in the U.S., reported $99.8 billion in 2013 revenue $98.7 billion worth of income is astronomical. (JPMorgan will announce its full year 2014 earnings next week, analysts expect revenue to come in at $96.7 billion.)
The figure is also a record for the Fed, which distributed $79.6 billion to the Treasury in 2013 and $88.4 billion in 2012.
Click to enlarge. (Source: The Federal Reserve.)
Of course the Fed's purpose is not to create profit. The sky-high income is the result of the central bank's post crisis asset purchase program. The program, known as Quantitative Easing, was a key component of the central bank’s attempt to simulate growth in an American economy that was struggling to come back from the 2008 recession. QE ultimately lasted 37 months and wrapped up in October.
In practice the Fed's transfer amounts to little more than fancy inter-departmental accounting-- just on a governmental scale. This is because the Fed took in $115.9 billion in interest income last year from the $4 trillion worth of securities it purchased -- including Treasury bonds -- through QE. Interest was the chief driver of its estimated $101.5 billion in net income. In addition to interest income, $435 million in earnings came from services and $101 million from the consolidated limited liability companies that were created in response to the financial crisis.
The Fed says its 12 banks' operating expenses totaled $3.6 billion last year. In addition, the banks reported $711 million in costs associated with producing, issuing, and retiring currency, $590 million for Board expenditures and $563 million for the Consumer Financial Protection Bureau.
