Financial Update (First Quarter 2008)

Reserve Banks Return More Than $34 Billion to Treasury

US Treasury buildingAs it does every year, in 2007 the Federal Reserve System transferred most of its net income to the U.S. Treasury. The 2007 transfer totaled more than $34.4 billion.

Securities interest, commercial services generate income
These funds came primarily from three sources. The largest portion is interest earned on U.S. government securities the Federal Reserve holds in its portfolio. In 2007, this interest totaled $40.3 billion. The income that the Reserve Banks generated through fees for providing services such as payments processing for depository institutions contributed an additional $878 million. Another $765 million came mainly from earnings on foreign currency, loans and other income.

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Tallying up
The operating expenses of the 12 Reserve Banks ($2.6 billion in 2007), the expenses of the Board of Governors ($296 million), and the cost of currency ($576 million) were deducted from Reserve Banks' total income. Net additions to income were $198 million, largely from unrealized gains in assets denominated in foreign currencies that were revalued to current market exchange rates. After deductions, the Federal Reserve Banks' 2007 net income was about $38.6 billion.

Board policy directs each Reserve Bank to transfer its yearly net income to the U.S. Treasury after paying statutory dividends ($992 million in 2007) to Federal Reserve member banks and making adjustments necessary so that surplus equals paid-in capital ($3.12 billion in 2007).

January 25, 2008