The Marriner S. Eccles Building houses the main offices of the Board of Governors of the Federal Reserve System. I(Photo: Jack Gruber, USA TODAY)
WASHINGTON -- The Federal Reserve paid the federal government a record $88.9 billion in 2012.
central bank earned the money from the Treasury bonds and
mortgage-backed securities it has bought to drive interest rates lower
and boost the economy.
The Fed said Thursday that the 2012 payment
was up 17.9% from 2011, when it paid the federal government $75.4
billion. It also surpassed the previous record of $79.3 billion in 2010.
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 reduce unemployment.
It is currently buying $85 billion in bonds each month.
officials say the massive bond buying, known as quantitative easing, is
needed until economic growth is stronger. But critics contend 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 pays the remaining amount to the Treasury Department.
Before the Fed launched the first bond buying program in 2008, its
annual payments had averaged less than $30 billion the previous three
The 2012 payment to the Treasury was reduced by $387
million that went to fund 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
Republicans opposed having these agencies
receive their operating funds from the Federal Reserve rather than going
through the normal appropriations process in Congress.