The Federal Reserve made a record contribution of $79.3bn to the US Treasury in 2010 from investments such as its large portfolio of mortgage bonds purchased to breathe life into the economy.
In audited financial statements for 2010, the Fed said its reserve banks held $2,423bn in assets, up from $2,235bn a year earlier, allowing it to pay a bigger contribution to the Treasury than last year’s $47.4bn.
The record balance sheet was swollen by the start of the Fed’s $600bn programme to buy US Treasury bonds, its latest attempt to stimulate growth, and follows asset purchases that have left it with a large volume of mortgage-backed securities.
Income from the assets is much higher than normal because of the extraordinary measures taken by the Fed in the financial crisis.
Among the operating expenses were $33m for the new Consumer Financial Protection Bureau and $10m for the Office of Financial Research. Both entities were created under the Dodd-Frank financial reforms passed by Congress last year.
The financial statements include results for the New York Fed’s Maiden Lane II vehicle, which warehouses securities that have been the subject of tense discussions with AIG, the bailed-out insurance group.
The Maiden Lane II statement shows the fair value of the portfolio increased to $16.5bn from $15.9bn a year earlier. This would put AIG’s $15.7bn bid to repurchase the assets at a bigger discount than previously estimated.
AIG wants to buy back the assets to reduce its obligations to the government while finding a higher-yielding use for its cash. But other potential bidders, including Barclays, have emerged and officials at the New York Fed have not decided whether to sell the portfolio in one block to AIG or another bidder or to split it up.