Where does a Federal Reserve Bank receive its operating income?
The great bulk of the earnings of the Federal Reserve Banks comes from interest payments made by the federal government on U.S. Treasury securities held by Reserve Banks. These securities are held in the portfolio of the Federal Open Market Committee and are physically housed at the Federal Reserve Bank of New York. Each of the 12 Federal Reserve Banks owns a part of these securities, the proportion of ownership being based on each bank’s total assets. A smaller portion of each Reserve Bank’s earnings comes from interest on borrowing by member banks. The earnings from discount operations varies from year to year, depending on member bank borrowing and the discount rate. In addition, the Monetary Control Act of 1980 has required the Federal Reserve Banks to price most of their services beginning in 1981. Therefore, the Federal Reserve receives direct income from fees paid by financial institutions using its services. Earnings in excess of expenses are returned to the Treasury.
The great bulk of the earnings of the Federal Reserve Banks comes from interest payments made by the federal government on U.S. Treasury securities held by Reserve Banks. These securities are held in the portfolio of the Federal Open Market Committee and are physically housed at the Federal Reserve Bank of New York. Each of the 12 Federal Reserve Banks owns a part of these securities, the proportion of ownership being based on each bank’s total assets. A smaller portion of each Reserve Bank’s earnings comes from interest on borrowing by member banks. The earnings from discount operations varies from year to year, depending on member bank borrowing and the discount rate. In addition, the Monetary Control Act of 1980 has required the Federal Reserve Banks to price most of their services beginning in 1981. Therefore, the Federal Reserve receives direct income from fees paid by financial institutions using its services. Earnings in excess of expenses are returned to the Treasury.
