Federal Reserve Profits

The Federal Reserve, which is by law bound to return residual earnings of each of its district banks after certain costs, derived 2011 net income of $78.9 billion, chiefly from $83.6 billion in interest income on securities acquired through open market operations. Those securities include bonds and mortgage-backed securities tied to government-sponsored enterprises, primarily Fannie Mae and Freddie Mac, interest paid on U.S. Treasury securities were the biggest factor as a result of the central bank’s massive government bond purchases through quantitative easing.

So although this may seem like a windfall for the Treasury and the American tax-payer, a large portion of the returned residual earnings merely amounts to taking money out of one pocket and putting it in another.