Fed Makes More And More Money By Making Money
Instead, the improvement reflected in part calendar effects, in part a sharp drop in outlays for TARP and in part increased profits at the Federal Reserve. The massive asset purchase program has meant that the Fed holds large amounts of relatively high yielding securities, meaning their interest revenues have increased. Meanwhile, its formal liabilities in the form of currency in circulation and bank reserves costs the Fed nothing (for currency) or very little (for bank reserves which costs the Fed just 0.25%) in interest. Being in the money printing business has always been profitable, but it is now more profitable than ever.