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Banking

Reserve Banks Return $78 Billion to U.S. Treasury

photo of Treasury building

In 2010 the Federal Reserve System transferred most of its net income to the U.S. Treasury. The 2010 transfer totaled $78.4 billion. This amount represents a $31 billion increase over 2009's results, primarily the result of increased earnings on securities holdings during 2010.

Securities interest, commercial services generate income
The significant increase in earnings on securities came about because of the increased securities holdings that the Federal Reserve purchased in response to the severe economic downturn. The following list shows the breakdown of the Federal Reserve Banks' 2010 net earnings:

  • $76.2 billion in earnings on securities acquired through open market operations (U.S. Treasury securities, government-sponsored enterprise [GSE] debt securities, and federal agency and GSE mortgage-backed securities)
  • $7.1 billion in net earnings from consolidated limited liability companies, which were created in response to the financial crisis
  • $2.1 billion in interest income from credit extended to American International Group Inc.
  • $1.3 billion of dividends on preferred interests in AIA Aurora LLC and ALICO Holdings LLC
  • $0.8 billion in earnings on loans extended under the Term Asset-Backed Securities Loan Facility (TALF) and loans to depository institutions

The Reserve Banks had interest expenses of $2.7 billion on depository institutions' reserve balances and term deposits.

The income that the Reserve Banks generated through fees for providing services such as payments processing for depository institutions contributed an additional $600 million.

Tallying up
The operating expenses of the 12 Reserve Banks totaled $4.3 billion in 2010, including the expenses of the Board of Governors and the cost of currency, were $1 billion collectively.

Federal Reserve Board policy directs each Reserve Bank to transfer its yearly net income to the U.S. Treasury after paying statutory dividends ($1.6 billion in 2010) to Federal Reserve member banks and making adjustments necessary so that surplus equals paid-in capital ($0.6 billion in 2010).

January 25, 2011

 

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