February begins with more losses for the Federal Reserve. The week ending February 1, 2023, concluded the same as recent prior weeks for the Federal Reserve – with a loss. For the week ending February 1st, the Federal Reserve lost $1.084 billion dollars. Until the accumulated losses have been recouped, the U.S. Treasury will not receive any of the Federal Reserve’s profits. The total accrued loss that the Federal Reserve must earn back before resuming remittances to the U.S. treasury is $26.959 billion, as of February 1, 2023. This means that the U.S. government will either need to cut spending, raise revenue, or incur additional debt.
The Fed accumulated losses of $26.959 billion since August 31st 2022. In comparison, Meta earned $23.2 billion for the full year of 2022. In other words, the Federal Reserve managed to lose more money in only five months than one of the largest and most financially successful companies earned over a full year of operations. Since the Fed’s accrued earnings turned negative, they have only shown positive earnings for a single week. As of their reporting for the week ending February 1, 2023, the Federal Reserve has lost money for the most recent 20 consecutive weeks.
Losses at the Federal Reserve Causes and Consequences
In short, the Fed is losing money because their borrowing costs are higher than the interest they receive on their holdings.
Until one or more of the following occurs, the Fed is likely to continue losing money:
- A sufficient portion of the Federal Reserve’s current holdings mature and they are able to purchase higher yielding assets.
- Banks and/or money market funds reduce the amount they have deposited or invested in Reverse Repo agreements at the Fed.
- The Federal Reserve reverses course on interest rates and starts lowering rates again.
Unless one of the above changes, February’s losses at the Federal Reserve will continue into March.
Fed Losses: the Fed is Losing Money, more completely explains the Federal Reserve’s holdings and why they are losing money. For more about the significance of the Fed’s losses and economic impacts, see: How Much Can the Fed Tighten? To keep up with developments moving forward, you can follow the Fed losses dashboard.
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