Lots of Red Ink at the Fed: Is The Federal Reserve Going Bankrupt?

Didn't know which forum to place this.

The Federal Reserve has officially reported a loss of $57 billion for the first six months of 2023. It seems that the Federal Reserve Banks have finally outdone themselves. They are reporting huge loses on their books for the first time in 100+ years. They are now collecting 2% interest on the money they loan and paying out 5% on the money they borrow. The loss for the later months of 2022 was $17 billion. This totals $74 billion of accumulated losses by June 30.

Several major banks across the nation have collapsed since the beginnings of the beginnings of the 2020s and it is beginning to look as if the Federal Reserve Bank may be the next bank to default.

Mises Org

The Federal Reserve has officially reported a loss of $57 billion for the first six months of 2023. Quite a number! So the “Federal Reserve Banks Combined Quarterly Financial Report as of June 30, 2023” (CQFR)—a little-known document—is especially notable for its red ink. We can anticipate an annual loss of over $100 billion for 2023 and for the losses to continue into 2024. 1

The CQFR shows that in the first six months of 2023 the combined Fed had $88 billion in interest income, but $141 billion in interest expense. So it paid out in interest $53 billion more than it received, and also had to pay its overhead expenses of over $4 billion.

Why doesn’t it have more interest income? Because the Fed engaged to the tune of about $5 trillion in one of the most classic of financial risks: borrowing short and lending long, and now interest rates have gone very far against it and the risk has turned into real losses.

The CQFR shows on page 22 that on June 30 the combined Fed owned $5.5 trillion in Treasury Securities with an average yield of 1.96%, and $2.6 trillion of mortgage-backed securities yielding on average 2.20%. In short, it invested in massive amounts of very long-term fixed rate assets and locked in for years a historically low yield of about 2%. Meanwhile, it was funding $5 trillion of these assets with floating rate deposits from banks and borrowings in the form of repurchase agreements, the cost of which rose to over 5%.

You don’t need a degree in banking or a Ph.D. in economics to know that lending money at 2% while you are borrowing money at 5% is a losing proposition. That is what our Federal Reserve Banks did and continue to do.

On top of this, as disclosed in the footnotes of the CQFR on page 7, when the combined Fed’s investments were marked to market on June 30, they had a market value loss of over $1 trillion, or a market value loss of 23 times the Fed’s stated capital.

The CQFR reports a total capital of about $42 billion ($35.6 billion of paid-in capital from the member commercial banks and $6.8 billion of retained earnings, called “surplus”). But note: This total capital is much less than the $57 billion reported loss for the six months of 2023, to which must be added the loss for the later months of 2022 of $17 billion. This total $74 billion of accumulated losses by June 30 must be subtracted from the retained earnings and thus from total capital. But the Fed does not do this—it misleadingly books its losses as an asset (!), which it calls a “deferred asset”-- a practice highly surprising to anyone who passed Accounting 101. Why does the Fed do this? Presumably it does not wish to show itself with negative capital. However, negative capital is the reality.

Here are the combined Fed’s correct capital accounts as of June 30, based on Generally Accepted Accounting Principles. They result in a capital of negative $32 billion:

Paid-in capital $36 billion
Retained earnings ($68 billion)
Total capital ($32 billion)


The Fed wants you to believe that neither its negative capital nor its giant losses matter because it is the Fed and can print money. Many economists agree.

So are we about to see the total collapse of the US Dollar?

How are they going to wriggle their way out of this predicament? Print MORE money? Create MORE inflation?

a reply to: LittleJake

Why doesn’t it have more interest income? Because the Fed engaged to the tune of about $5 trillion in one of the most classic of financial risks: borrowing short and lending long, and now interest rates have gone very far against it and the risk has turned into real losses.

How are they going to wriggle their way out of this predicament? Print MORE money? Create MORE inflation?

Jack up the interest rates even higher. That should do the trick!

Ah, the catalyst for digital currency has been announced.

a reply to: LittleJake

Of course. And folk believe it's part of government. It is not...they can go away anytime.

Who doesn't know...it's not the gov?

a reply to: LittleJake

Once BRICs gets OPEC to unpeg oil from the dollar, it's game over for the US economy.

a reply to: LittleJake

The Bank never “goes broke.” If the Bank runs out of money, the Banker issues IOUs for whatever amounts are required by writing the amount on a piece of paper. IOUs can be exchanged for cash whenever cash is available; otherwise they are simply counted in the assets of the player holding them.

Monoply Rules

I'm more concerned that the US government is about to go bankrupt.

a reply to: LittleJake

They are now collecting 2% interest on the money they loan and paying out 5% on the money they borrow.

Close.

As of July 2023, the United States government has a monthly interest rate of 2.84 percent on its debt

Average monthly interest rates on United States total interest-bearing debt from July 2018 to July 2023

So the US government's interest payment, if compounded annually would be, $32.92 trillion times .0284 and equal a 939 Billion dollar interest payment.

US government ALREADY IS bankrupt. THERE IS NO MONEY.
The trouble is that they refuse to let themselves default on a predatory loan, and the Federal Reserve keeps saying "Okay fine you can have another extension but the rates are gonna be EVEN HIGHER, and they're like "#, okay I guess". The ones in power who could change it are all getting their pockets lined with the fiat currency, so they perpetually let it slide.
How do people not understand this?
That's kinda the whole issue right now.


a reply to: IndieA

this is a major part of the nwo plan to reorganize the global systems.

the accelerated arrogance of global leaders is suspect

a reply to: LittleJake

Sources, sources, sources. I don't think Mises.org is a source that I would trust an analysis from, but suit yourself.

a reply to: FyreByrd

Another source

Like all central banks, the Federal Reserve was designed to make money for the government from its monopoly on issuing currency. The Fed did generate profits, which it sent to the Treasury, every year from 1916 on—until last fall. In a development previously unheard of, the Federal Reserve has suffered operating losses of about $42 billion since September 2022.

From March 26

Also I don't believe the federal reserve is either one.

originally posted by: Saloon
a reply to: FyreByrd

Another source

Like all central banks, the Federal Reserve was designed to make money for the government from its monopoly on issuing currency. The Fed did generate profits, which it sent to the Treasury, every year from 1916 on—until last fall. In a development previously unheard of, the Federal Reserve has suffered operating losses of about $42 billion since September 2022.

From March 26

Also I don't believe the federal reserve is either one.

Another questionable source misrepresenting the relationship between the Federal Reserve Banks and the Federal government.

The Federal Reserve System was not designed (as stated in your source) to “Make money for the government from it’s monopoly on issuing currency.

1) the purpose of the Fed is to:

The Federal Reserve System was created in 1913 in response to growing concerns that the U.S. financial system was being dominated and manipulated by a small number of banking institutions for the benefit of a few of the business titans of the day.

Its most visible role is in adjusting the interest rates paid for U.S. Treasuries, bonds, and other debt issued by the Treasury. The changes the Fed decrees directly influence all other lending rates for consumers and businesses. By encouraging or discouraging lending and borrowing, the Fed strives to warm up a tepid economy or cool down a too-hot economy. The right balance keeps inflation and unemployment in check.10
Overall, the goal is to ensure that lenders and borrowers have sufficient access to money and credit.

The Federal Reserve also supervises and regulates banks operating in the U.S.11

To answer a frequently-asked question, no one owns the Federal Reserve, and no one profits from its operations. It is a not-for-profit entity that provides services to American financial institutions on behalf of the U.S. government.

From: www.investopedia.com...


3) As a not-for-profit (see last paragraph above), at the end of the Fiscal Year it transfers any “Retained Earnings” on it’s balance sheet to the US Treasury. This is nothing new.

Another ingenuious statement from your source is, the last sentence in fact, is:

“ The Fed tried to play down the importance of the issue, arguing that its “mandate is neither to make profits nor to avoid losses”—a deflection that is disappointingly transparent to anyone familiar with central banking.”

Not a deflection at all but a verifiable statement of fact.

I have no idea what any repercussions might be from this be, but I suspect the loss to the Balance Sheet was from offloading Bad Corporate assets that it had been carring for years.

a reply to: FyreByrd

don't forget the 6% dividends paid to all stockholders

a reply to: FyreByrd

The Federal Reserve System was created in 1913 in response to growing concerns that the U.S. financial system was being dominated and manipulated by a small number of banking institutions for the benefit of a few of the business titans of the day.

Sounds like you're saying the banks created a problem, that the banks
convinced the government that only that only the banks could solve,
by taking control of the money to me.

Is there no truth in saying "Give me control of the money and I care not
who makes the laws"? Are you really trying to convince me everything is on the
up n up at the Fed? Stock holders CEOs WEF all just straight up great people
right? Cause I really don't know but I doubt it.