Federal Reserve pays $77 billion to Treasury

@CNNMoney January 10, 2012: 1:51 PM ET

NEW YORK (CNNMoney) -- Ben Bernanke is about to hand Timothy Geithner a very large check.

The Federal Reserve announced Tuesday that it plans to pay the Treasury $76.9 billion, the bulk of the Fed's 2011 income after accounting for its own operating expenses.

Each year after paying its own bills, the central bank hands over all its remaining earnings to the Treasury, as per Fed policy. Most of the money is derived from interest earned on holdings like Treasury bonds and other debt.

The payments have ballooned in recent years as the Fed has earned huge profits from the large bond portfolio it amassed during the financial crisis. The Treasury payment topped out at $79.3 billion in 2010 and remains at historically high levels.

The Fed started stockpiling Treasuries, mortgage-backed securities and agency debt in 2008, in programs known as quantitative easing and QE2. As a result, the central bank now holds a massive $2.9 trillion on its books. The goal was for the asset purchases to bring down interest rates, stimulating more lending and borrowing in the U.S. economy.

The Fed ended 2011 with $78.9 billion in profit, mainly from interest it earned on those securities, as well as some income from foreign currency gains, the sale of services and the sale of some U.S. Treasuries.

The central bank, which is not funded by taxpayer dollars, had operating expenses of $3.4 billion.

It was also assessed $1.4 billion to fund new currency, Federal Reserve Board expenditures and the creation of both the Consumer Financial Protection Bureau and the Office of Financial Research, as required by Dodd-Frank legislation. To top of page

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