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The US Federal Reserve Records Largest Loss in History
In 2023, the US Federal Reserve recorded the largest operating loss in its 110-year history and was therefore unable to return almost anything to the treasury, as it should do when it makes profits.
2023 Operating Loss
The loss amounted to $114.3 billion in 2023, according to preliminary estimates for the 2023 accounts of this institution that carries out the functions of the central bank. In 2022, it achieved a profit of $58.8 billion.
Reasons for Loss
This loss is related, on the one hand, to the increase in interest rates that the Federal Reserve used to curb high inflation. It forced him to pay more money for bank reserves as well as the Treasuries and mortgage-backed stocks he held. The Federal Reserve will thus pay $281.1 billion in interest in 2023, an increase of $178.7 billion over the previous year.
On the other hand, one of the Federal Reserve’s sources of income declined last year, which is the interest it receives from the bonds and stocks it holds. In fact, the Federal Reserve, after heavy purchases during the Covid crisis to support the economy, is now reducing its portfolio. As his portfolio yield deteriorated, he received only $163.8 billion in interest in 2023, $6.2 billion less than the previous year.
Financial Impact
In normal times, the Federal Reserve pays the Treasury each week all of its profits after deducting its needs for the costs of operating its headquarters in Washington and the profits paid to its 12 subsidiary banks in the states, which make up the Federal Reserve System. But when profits are not enough to cover these costs, the Federal Reserve becomes indebted to the Ministry of Economy and Finance and is counted as deferred assets. The Federal Reserve will not resume paying money to the Treasury until it achieves a profit that allows it to cover this amount. In 2023, he was unable to send more than $670 million to the treasury, and the value of his deferred assets amounted to $116.4 billion, to which $16.6 billion was added from 2022. The total thus became $133 billion. In 2022, the Fed was able to pay $76 billion to the Treasury because it made a profit through September.
Source
Source: AFP
