Fed repays record US$78.4b

The United States Federal Reserve paid a record US$78.4 billion in earnings to the US government last year, reflecting gains from the central bank's unconventional efforts to lift the economy.

The payment to the Treasury Department is the largest since the Fed began operating in 1914.

It surpasses the previous record US$47.4 billion paid in 2009, the Fed said Monday.

The bigger payment mostly came from more income generated by the Fed's massive portfolio of securities, which includes Treasury debt and mortgage securities.

Critics in Congress have expressed concerns that the Fed's purchases could put taxpayers at risk by reducing the amount turned over to Treasury.

The Fed is funded from interest earned on its portfolio of securities. It is not funded by Congress. After covering its expenses, the Fed gives what is left over to the Treasury Department.

Income from the Fed's portfolio of securities came to US$76.2 billion last year, up from US$48.8 billion in 2009, Federal Reserve officials said.

Such income rose largely because the Fed bought a greater number of securities. Increases in the value of securities also played a role.

In early November, the Fed launched a programme to bolster the economy by purchasing US$600 billion worth of Treasury debt through June.

The programme aims to boost the economy by lowering rates on mortgages and other loans and by lifting stock prices.

Republicans in Congress and others have criticised the programme, saying the Fed is printing money to pay for the US government's swollen deficits and debt.

To fight the financial crisis and lift the country out of recession, the Fed bought US$1.4 trillion of mortgage-backed securities and mortgage debt, as well as up to $300 billion worth of government debt.

The Fed completed the mortgage purchases last year.

The purchase programmes have helped boost the value of securities held by the Fed.

But the Fed could lose money if the central bank had to sell those securities and their prices were to fall. Once the economy is on firm footing, the Fed will need to mop up some of the money it pumped into the economy.

The Fed could do that by selling some securities to reduce its balance sheet to a more normal size.

Federal Reserve Chairman Ben Bernanke has said the Fed's goal is to eventually return the portfolio back to holdings of only Treasury securities. The Fed's balance sheet now stands at US$2.4 trillion, nearly triple its size from before the financial and economic crises.

- AP