WASHINGTON — The Federal Reserve Board said Wednesday that the system paid roughly $80.2 billion to the Treasury in 2017, driven by $113.6 billion in interest income from securities held on the central bank’s balance sheet.
The figure is an $11.7 billion, or nearly 13%, drop from the Fed’s 2016 payment to the Treasury, which was $91.5 billion. The drop-off reflects a $13.8 billion increase in interest payments to member banks for their reserve balances because of higher interest rates set by the Federal Open Market Committee over the course of the year.
Those payments were offset by a $2.5 billion increase in interest payments the Fed received on its securities in portfolio because of higher interest rates.
The Fed said that its operating expenses for the entire Federal Reserve System totaled $4.1 billion, not including $724 million in currency operations, $740 million in board expenditures and the Consumer Financial Protection Bureau’s $573 million annual budget.
As the central bank of the United States, the Federal Reserve conducts open market operations with an eye toward stabilizing prices and maintaining full employment. That means buying and selling securities in order to set a baseline federal interest rate, which had been set at almost zero after the financial crisis and did not rise again until December 2015.
The Fed also purchased large volumes of mortgage-backed securities, government-sponsored-enterprise debt securities and Treasuries in order to stabilize the financial system, which caused the Fed’s balance sheet to swell from $869 billion in August 2007 to a high of over $4.5 trillion in January 2015. One side effect of the Fed’s larger balance sheet is that interest on assets it holds have gone up as well, from $31.7 billion in 2008 to a high of almost $100 billion in 2015.
The Fed initiated a program of rolling off mature securities on its balance sheet in September, which would gradually reduce the Fed’s balance sheet over time. As of December 2017, the Fed’s balance sheet was just under $4.45 trillion.