By Michael S. Derby
NEW YORK (Reuters) – The Federal Reserve has broken this year with its long-standing practice of releasing an annual preview of its finances for the preceding year.
The U.S. central bank has released a preliminary statement detailing its annual profit or loss in early January since at least 2006, but has yet to release the numbers for 2024. The preliminary statement is later updated with a finalized and audited version.
A Fed spokesperson said the audited version of the financial statement will be released later this month.
For the vast majority of the time the Fed has disclosed its finances, it has generated a profit, often a big one. But that changed in 2023, when the independent federal agency swung to a record loss, or “net negative income” as described in its statements. For 2023 the loss was a record $114.3 billion, after net positive income of $58.8 billion in 2022.
Fed officials have long said its earnings situation has no effect on its monetary policy or operations. But some observers have long feared Fed losses, even as they’re driven by a system set up by Congress, could create political friction.
Although that has yet to happen in a significant fashion, the push by U.S. President Donald Trump and Tesla CEO Elon Musk’s Department of Government Efficiency to shrink the federal government could heighten the risk. Government agencies were facing a deadline on Thursday to submit proposals for widescale reductions in their workforces.
Under Fed Chair Jerome Powell’s leadership, the central bank has had a fraught relationship with Trump, even though it was the Republican president who elevated Powell to the role during his first term in the White House.
Peter Conti-Brown, a financial regulation professor at the Wharton School of the University of Pennsylvania, said a major challenge facing the Fed “is to manage the demands of political accountability with the fact that those who will make those demands have little regard for central bank independence.”
“The Fed,” he said, “is subject to a searing and motivated external attack from current advisers to the president who seem to be spoiling for a fight and would launch it with even minor provocation.”
MONEY MANAGEMENT
The Fed is required by law to hand back to the U.S. Treasury any net earnings after covering its expenses. The central bank earns money primarily from the interest income derived from the bonds it owns, purchased as part of its monetary policy and market stabilization work. It also gets paid to provide services to the financial sector, although that income stream is dwarfed by its bond income.
