US Federal Reserve Losses: An Income Statement Perspective
-
Yuri Biondi
Abstract
Since September 2022, the US Federal Reserve, the central bank of the United States, has been incurring realised losses. Generally speaking, analyses take a balance sheet perspective which assesses losses as the difference between assets, liabilities and respective returns. This note develops an income statement perspective which points to operational costs, transactions with financial institutions and transactions with the US Department of the Treasury (US Treasury), shedding light on central banking as a public-private partnership which operates as Treasury issue bank, banks’ bank, and foreign exchange agency. Accordingly, Fed loss-making operations result from the large remunerated reserves regime put in place to respond to the North-Atlantic Financial Crisis of 2007–8, involving implicit coordination between the Fed and the US Treasury for fiscal and monetary policies joint implementation, while implying material transfers from the Treasury to financial institutions that add to incurred costs for unconventional monetary policies.
Primary Sources
Federal Reserve – Fed, Combined and Individual Reserve Banks financial statements, Audited Annual Financial Statements of the Federal Reserve System as of and for the years ended between December 31, 2007 and 2024. Suche in Google Scholar
Federal Reserve’s Semi-Annual Monetary Policy Report (2023), Hearing Before The Committee On Financial Services, U.S. House Of Representatives, One Hundred Eighteenth Congress, First Session, June 21, Washington DC: U.S. Government Publishing Office. Suche in Google Scholar
US Congress (2016) Interest On Reserves And The Fed’s Balance Sheet, Hearing Before The Subcommittee On Monetary Policy And Trade Of The Committee On Financial Services, U.S. House Of Representatives, One Hundred Fourteenth Congress, Second Session, Serial No. 114–87, May 17. Washington DC. Suche in Google Scholar
References
Archer, D., and P. Moser-Boehm. 2013. Central Bank Finances, Bank of International Settlements – BIS Papers No 71, April.Suche in Google Scholar
Bateman, W. 2021. “The Law of Monetary Finance Under Unconventional Monetary Policy.” Oxford Journal of Legal Studies 41 (4): 929–64. Winter https://doi.org/10.1093/ojls/gqab008.Suche in Google Scholar
Bell, S., M. Chui, T. Gomes, P. Moser-Boehm, and A. P. Tejada. 2023. Why are Central Banks Reporting Losses? Does it Matter?, Bank of International Settlements - BIS Bulletin No 68. 7 February.Suche in Google Scholar
Bessent, S. 2025. The Fed’s New ‘Gain-of-Function’ Monetary Policy, The International Economy, Spring 2025, 16–23 and 68. https://www.international-economy.com/TIE_Sp25_Bessent.pdf (accessed October 17, 2025).Suche in Google Scholar
Bholat, D., and R. Darbyshire. 2018. “Central Bank Accounting.” In Research Handbook on Central Banking, edited by Peter Conti-Brown, and Rosa M. Lastra, 314–32. Cheltenham: Elgar Pub. Chapter 16.Suche in Google Scholar
Bindseil, U. 2005. Monetary Policy Implementation: Theory, Past, and Present. Oxford: Oxford University Press.Suche in Google Scholar
Bindseil, U. 2016. Evaluating Monetary Policy Operational Frameworks, Federal Reserve Bank of Kansas City Economic Symposium “Designing Resilient Monetary Policy Frameworks for the Future”, Jackson Hole (Wyoming), 26 August. https://www.kansascityfed.org/Jackson%20Hole/documents/7036/BindseilPaper_JH2016.pdf (accessed October 17, 2025).Suche in Google Scholar
Bindseil, U., A. Manzanares, and B. Weller. 2004. The Role of Central Bank Capital Revisited, European Central Bank – ECB Working Paper Series No. 392, September.Suche in Google Scholar
Biondi, Y. 2016. “Empowering Market-based Finance: a Note on Bank Bailouts in the Aftermath of the North Atlantic Financial Crisis of 2007.” Accounting, Economics and Law – A Convivium 6 (1): 79–84. https://doi.org/10.1515/ael-2016-0004.Suche in Google Scholar
Biondi, Y. 2018a. “Banking, Money and Credit: a Systemic Perspective.” Accounting, Economics, and Law: A Convivium 8 (2). https://doi.org/10.1515/ael-2017-0047.Suche in Google Scholar
Biondi, Y. 2018b. “The Financial Sustainability Conundrum in Central Government.” Accounting, Economics, and Law: A Convivium 8 (3). https://doi.org/10.1515/ael-2018-0003.Suche in Google Scholar
Bonis, B., L. Fiesthumel, and J. Noonan. 2018. “Soma’s Unrealized Loss: What Does it Mean?” In FEDS Notes. Washington: Board of Governors of the Federal Reserve System. August 13.Suche in Google Scholar
Borio, C. 2023. Getting up from the Floor, Bank of International Settlement – BIS Working Papers No 1100, May.Suche in Google Scholar
Broeders, D., A. Houben, and M. Bonetti, eds. 2025. Central Bank Capital in Turbulent Times. The Risk Management Dimension of Novel Monetary Policy Instruments. Cham, Switzerland: Springer Nature Switzerland AG.Suche in Google Scholar
Buiter, W. 2008. Can Central Banks Go Broke? Center for Economic Policy Research – CEPR Policy Insight No. 24, May.Suche in Google Scholar
Bunea, D., P. Karakitsos, N. Merriman, and W. Studener. 2016. Profit Distribution and Loss Coverage Rules for Central Banks, European Central Bank – ECB Occasional Paper Series No 169, April.Suche in Google Scholar
Congressional Budget Office – CBO 2005. Cost Estimate on H.R. 1224 Business Checking Freedom Act of 2005, as Ordered Reported by the House Committee on Financial Services on April 27, May 10. https://www.cbo.gov/publication/16508 (accessed October 17, 2025).Suche in Google Scholar
Congressional Budget Office – CBO. 2006. Cost Estimate on S. 2856 Financial Services Regulatory Relief Act of 2006, as Cleared by the Congress on September 30, and Signed by the President on October 13, November 29. https://www.cbo.gov/publication/18253 (accessed October 17, 2025).Suche in Google Scholar
Congressional Budget Office – CBO. 2024. Monthly Budget Review: Summary for Fiscal Year 2024, November 8. https://www.cbo.gov/publication/60843 (accessed October 17, 2025).Suche in Google Scholar
Congressional Research Service. 2017. Federal Reserve: Oversight and Disclosure Issues, Version 27, March 27. https://www.congress.gov/crs-product/R42079 (accessed October 17, 2025).Suche in Google Scholar
Congressional Research Service. 2025. Federal Reserve: Policy Issues in the 119th Congress, Version 2, February 3. https://www.congress.gov/crs-product/R48390 (accessed October 17, 2025).Suche in Google Scholar
Dalton, J., and C. Dziobek. 2005. Central Bank Losses and Experiences in Selected Countries, International Monetary Fund – IMF Working Paper No. 72, April.Suche in Google Scholar
de Grauwe, P., Ji, Y. 2023. Towards Monetary Policies that do Not Subsidise Banks, Center for Economic Policy Research – CEPR, 13 July.Suche in Google Scholar
Diessner, S. 2023. “The Political Economy of monetary-fiscal Coordination: Central Bank Losses and the Specter of Central Bankruptcy in Europe and Japan.” Review of International Political Economy 31 (3): 1099–121. https://doi.org/10.1080/09692290.2023.2295373.Suche in Google Scholar
Dietsch, P., F. Claveau, and C. Fontan. 2018. Do Central Banks Serve the People? Cambridge: Polity Press.Suche in Google Scholar
Federal Reserve - Fed. 2011. Federal Reserve Statistical Release, Factors Affecting Reserve Balances. https://www.federalreserve.gov/releases/h41/20110106/ (accessed January 6, 2011).Suche in Google Scholar
Federal Reserve - Fed. 2025. Interest on Reserve Balances. March 20. https://www.federalreserve.gov/monetarypolicy/reserve-balances.htm (accessed October 17, 2025).Suche in Google Scholar
Federal Reserve - Fed New York. 2024. FAQs: Reverse Repurchase Agreement Operations, December 18. https://www.newyorkfed.org/markets/rrp_faq.html#:∼:text=A%20reverse%20repurchase%20agreement%20conducted,specific%20time%20in%20the%20future (accessed October 17, 2025).Suche in Google Scholar
Federal Reserve – Fed. 2024. Financial Accounting Manual for Federal Reserve Banks, Board of Governors of the Federal Reserve System, Guidance & Supervision, April.Suche in Google Scholar
Federal Reserve – Fed San Francisco. 2013. Why did the Federal Reserve Start Paying Interest on Reserve Balances Held on Deposit at the Fed? Does the Fed Pay Interest on Required Reserves, Excess Reserves, or both? What Interest Rate Does the Fed Pay?, Dr. Econ - Research & Insights Publications, March 1. https://www.frbsf.org/research-and-insights/publications/doctor-econ/2013/03/federal-reserve-interest-balances-reserves/#:∼:text=In%20the%20United%20States%2C%20paying,the%20Fed’s%20monetary%20policy%20decisionmakers (accessed October 17, 2025).Suche in Google Scholar
Feldmann, J. 2025. “The Fed Balance Sheet and Income Statement Losses: Why They Matter from a Political Economic Viewpoint.” Accounting, Economics, and Law: Convivium. Forthcoming. https://doi.org/10.1515/ael-2024-0083.Suche in Google Scholar
G30 - Group of Thirty Working Group on Monetary Policy. 2023. Central Banking and Monetary Policy: Principles and the Way Forward, Special Report, 30 November. https://group30.org/publications/detail/5251 (accessed October 17, 2025).Suche in Google Scholar
Goodhart, C. A. E. 2010. The Changing Role of Central Banks, Bank of International Settlement – BIS Working Paper No 326, November, Basel. https://www.bis.org/publ/work326.pdf (accessed October 17, 2025).Suche in Google Scholar
Hawkins, J. 2004. Central Bank Balance Sheets and Fiscal Operations, Bank for International Settlements, BIS Papers, No. 20.Suche in Google Scholar
Humann, Th., K. J. Mitchener, and E. Monnet. 2023. “Faut-il S’Inquiéter Des Pertes Des Banques Centrales.” La Lettre Du CEPII, N° 440. September, Paris: Centre d’Etudes Prospectives et d’Informations Internationales.Suche in Google Scholar
Humann, Th., K. J. Mitchener, and E. Monnet. 2024. “Do Disinflation Policies Ravage Central Bank Finances?” Economic Policy 1–4. Forthcoming https://doi.org/10.1093/epolic/eiae039.Suche in Google Scholar
Kanda, H., and T. Yamanaka. 2018. “Central Banking in Japan.” In Research Handbook on Central Banking, edited by Peter Conti-Brown, and Rosa M. Lastra, 53–67. Cheltenham: Northampton, MA: E. Elgar Pub. chapter 4.Suche in Google Scholar
Levin, A. T., Skinner, Ch.P. 2024. Central Bank Undersight: Assessing the Fed’s Accountability to Congress. 77 Vanderbilt Law Review 1769. https://scholarship.law.vanderbilt.edu/vlr/vol77/iss6/3 (accessed October 17, 2025).Suche in Google Scholar
Muguruma, N. 2018. Is the Bank of Japan (Boj) Technically Insolvent? Dangers Involved in long-term Deterioration of Boj Financial Position. Discuss Japan - Economy, No.43, Feb. 22, Japan Foreign Policy Forum, 1–9.Suche in Google Scholar
Nordström, A., and A. Vredin. 2022. Does Central Bank Equity Matter for Monetary Policy?, Staff memo, Sveriges Riksbank, December.Suche in Google Scholar
Ortiz, G. (2009) Issues in the Governance of Central Banks. A Report from the Central Bank Governance Group, Chair: Guillermo Ortiz (Governor of the Bank of Mexico), Bank of International Settlements – BIS, May.Suche in Google Scholar
Pattipeilohy, Ch.. 2013. “A Descriptive Analysis of the Balance Sheet and Monetary Policy of De Nederlandsche Bank: 1900-1998 and Beyond.” De Nederlandsche Bank – DNB Occasional Studies 11 (3).Suche in Google Scholar
Pattipeilohy, Ch. 2016. A Comparative Analysis of Developments in Central Bank Balance Sheet Composition, De Nederlandsche Bank – DNB Working Paper No 510, April.Suche in Google Scholar
Pessoa, M., and M. Williams. 2012. Government Cash Management: Relationship Between the Treasury and the Central Bank, Technical Notes and Manuals No. 12/02, Fiscal Affairs Department, International Monetary Fund, November. https://www.imf.org/en/Publications/TNM/Issues/2016/12/31/Government-Cash-Management-Relationship-between-the-Treasury-and-the-Central-Bank-40111 (accessed October 17, 2025).Suche in Google Scholar
Schwarz, C., P. Karakitsos, N. Merriman, and W. Studener. 2015. “Why Accounting Matters: a Central Bank Perspective.” Accounting, Economics and Law – A Convivium 5 (1): 1–42. https://doi.org/10.1515/ael-2014-0023.Suche in Google Scholar
Shiratsuka, S. 2010. Size and Composition of the Central Bank Balance Sheet: Revisiting Japan’s Experience of the Quantitative Easing Policy, Institute for Monetary and Economic Studies, Bank of Japan, Monetary and Economic Studies Vol. 28, November. https://www.imes.boj.or.jp/research/abstracts/english/me28-6.html (accessed October 17, 2025).Suche in Google Scholar
Stella, P. 1997. Do Central Banks Need Capital? International Monetary Fund – IMF Working Paper July 83.Suche in Google Scholar
Stella, P. 2002. Central Bank Financial Strength, Transparency, and Policy Credibility, International Monetary Fund – IMG Working Paper No. 137, August. https://doi.org/10.5089/9781451855920.001.Suche in Google Scholar
Stella, P. 2009. The Federal Reserve System Balance Sheet: What Happened and Why it Matters, International Monetary Fund – IMF Working Paper No 120, May.Suche in Google Scholar
Stella, P., and A. Lonnberg. 2008. Issues in Central Bank Finance and Independence, International Monetary Fund – IMF Working Paper No 37, February.Suche in Google Scholar
Sullivan, K. 2005. Profits, Dividends, and Capital—Considerations for Central Banks, chapter 24 in “Current Developments in Monetary and Financial Law”, Vol. 3, International Monetary Fund – IMF, 29 April. https://doi.org/10.5089/9781589063341.072 (accessed October 17, 2025).Suche in Google Scholar
Sullivan, K., ed. 2005. Transparency in Central Bank Financial Statements Disclosures, International Monetary Fund – IMF Working Paper No 80, April.Suche in Google Scholar
Ugolini, S. 2017. The Evolution of Central Banking: Theory and History. London: Palgrave.Suche in Google Scholar
US Congress. 2004. The Financial Services Regulatory Relief Act of 2003-4, H.R.1375 – 108th Congress, 2003-2004. https://www.congress.gov/bill/108th-congress/house-bill/1375.Suche in Google Scholar
US Congress. 2005. Business Checking Freedom Act of 2005, H.R.1224 - 109th Congress 2005-2006. https://www.congress.gov/bill/109th-congress/house-bill/1224 (accessed October 17, 2025).Suche in Google Scholar
US Congress. 2006. Financial Services Regulatory Relief Act of 2006, S.2856 – 109th Congress, 2005-2006, Public Law No: 109–351. https://www.congress.gov/bill/109th-congress/senate-bill/2856 (accessed October 17, 2025).Suche in Google Scholar
Vaez-Zadeh, R. 1991. “Implications and Remedies of Central Bank Losses.” In The Evolving Role of Central Banks, edited by P. Downes, and R. Vaez-Zadeh, 69–92. Washington: International Monetary Fund.Suche in Google Scholar
© 2025 CONVIVIUM, association loi de 1901
