WASHINGTON—The Federal Reserve sent more profits to the Treasury Department last year as the income from its swelling asset holdings offset the impact of lower interest rates.
The Fed sent $86.89 billion to Treasury in 2020, up 58% from $54.89 billion in 2019, the central bank said Monday in an annual financial statement.
The central bank is required to use its earnings to cover its own operating expenses and send the bulk of any surplus to the Treasury’s general fund, where the money helps pay for the federal government.
The Fed last year cut short-term interest rates to near zero and began large-scale purchases of government debt and mortgage-backed securities to steady the financial system and support the economy during the coronavirus pandemic. The Fed earns interest on those assets, while paying interest on the money banks park at the central bank, called reserves.
The asset purchases expanded the Fed’s balance sheet to $7.36 trillion in 2020 from $4.17 trillion in 2019.
