Federal Reserve Transparency Lacking as Cash Operating Losses Surpass $100B
At the end of the federal fiscal year on September 30, 2023, the Federal Reserve will have spent about $110 billion to cover cash losses — about $9 billion in operating expenses and just over $100 billion in net interest expense; and will continue accumulating about $2.5 billion per week in losses as long as interest rates remain at current levels. In contrast, for most of the Federal Reserve’s history, the agency made operating profits and remitted them to the U.S. Treasury which reduced federal expenditures and net federal budget interest outlays. As a result, it comes into question as to whether or not the “Fed’s quantitative easing policies created economic benefits sufficiently large to justify the taxpayer costs being realized by the Fed today.” The just under $8 trillion in Treasury and mortgage-backed securities owned by the Fed earn on average about 2 percent interest, while the Fed currently pays more than 5 percent interest on the money it borrows to help pay for these securities. However, since the operating losses of the Federal Reserve are “not treated symmetrically in federal budget accounting conventions, in part perhaps because no one likely ever imagined that the Federal Reserve system would lose money,” a lack of transparency exists “because the Fed’s losses and associated indebtedness are not currently reported in the federal budget and debts statistics.