Federal Reserve

Fed's Mortgage Investments Result in Record Returns

Posted on Saturday, January 15, 2011

Income and expense data released by the Federal Reserve this week shows the central bank is earning a pretty penny from its investments in mortgage securities.
The Fed began buying mortgage bonds from Fannie Mae, Freddie Mac, and Ginnie Mae in November of 2008 to help prop up the nation’s deteriorating mortgage markets and provide a boost to the ailing economy.
In 2009, Fed officials reported that these efforts, combined with the central bank’s purchases of Treasury securities, yielded a $46.1 billion profit. In 2010, earnings on those investments jumped to $76.2 billion, based on the Federal Reserve’s preliminary estimates.
The increase can be attributed to the fact that the Fed boosted the size of its securities holdings during the year, as well as greater interest income earned on the bonds and appreciation in value.
Revenue from the central bank’s securities portfolio made up the bulk of its 2010 net income, which came to a total of $80.9 billion for the year. Under the Fed’s policy, after the costs of operations and payment of dividends, it turns over the residual earnings to the U.S. Treasury.
In 2010, the Federal Reserve paid Treasury $78.4 billion – the largest sum relinquished since the central bank was established in 1914.
In 2009, the Fed sent a payment of $47.4 billion to Treasury of its $53.4 billion net income. That payment at the time was considered the largest annual sum returned to Treasury in the Federal Reserve’s history.
By: Carrie Bay, DS News


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