WASHINGTON (AP) — The Federal
Reserve paid the federal government a record $88.9 billion in 2012.The
central bank earned the money from the Treasury bonds and
mortgage-backed securities it has purchased to drive interest rates
lower and boost the economy.
The Fed said Thursday that the
2012 payment was up 17.9 percent from 2011 when it paid the federal
government $75.4 billion. It also surpassed the previous record payment
of $79.3 billion made in 2010.
The Fed began buying Treasury
bonds and mortgage bonds during the last recession and has kept up the
effort since the downturn ended in June 2009 in an effort to boost the
sub-par recovery and lower high unemployment. It is currently purchasing
$85 billion in bonds each month.
Fed officials say the massive
bond buying, known as quantitative easing, is needed until economic
growth is stronger. But critics contend that the bond purchases could
ultimately lead to higher inflation.
All of the Fed’s purchases have
pushed the central bank’s balance sheet to $2.92 trillion, more than
three times the size of the Fed’s holdings before the financial crisis
struck in the fall of 2008.
The Fed is funded from interest
earned on its portfolio of securities. After covering its expenses, the
Fed makes a payment of the remaining amount to the Treasury Department.
Before the Fed launched the first bond buying program in 2008, its
annual payments had averaged below $30 billion for the previous three
years.
The 2012 payment to the
Treasury was reduced by $387 million which went to fund the operations
of the Consumer Financial Protection Bureau and the Office of Financial
Research, two new agencies created by the 2010 Dodd-Frank Act which
overhauled the government’s financial regulations. Republicans opposed
having these agencies receive their operating funds from the Federal
Reserve rather than going through the normal appropriations process in
Congress.