Thanks to interest-rate risk exposure, the central bank will soon have negative equity capital. 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 ...

When liabilities exceed assets, equity capital is negative and an entity is technically insolvent. Few institutions in that condition can continue operating at a loss indefinitely, and those that can usually benefit from an explicit government guarantee. Past special cases have included government-backed agencies like the U.S. housing GSEs. ...

The year 2023 is shaping up to be a challenging one for the Federal Reserve System. The Fed is on track to post its first annual operating loss since 1915. Per our estimates, the loss will be large, perhaps $100 billion or more, and this cash loss does not count the unrealized mark-to-market losses on the Fed's massive securities portfolio. ...

The Fifth Circuit Court of Appeals just ruled that the Dodd-Frank Act's requirement that the Federal Reserve pays the expenses of the Consumer Financial Protection Bureau is unconstitutional. This important ruling adds to another problematic aspect of the CFPB's funding scheme – the Federal Reserve no longer has enough earnings to cover the ...

Lately, no matter if the federal government is spending taxpayer dollars or losing them, it doesn't mess around with small change. The government allocated $4.6 trillion just in COVID relief spending, tens of billions of which have been siphoned off by fraud. And when it comes to losing taxpayers' hard-earned dollars, we've calculated that ...

They can keep their profits once they stop freeloading off the taxpayers. The U.S. Treasury began rescuing Fannie Mae and Freddie Mac in September 2008, ultimately pumping $187.5 billion into the two mortgage giants. In return, it received new issues of senior preferred stock. So how has its investment turned out? This is easy to calculate: ...

Fannie and Freddie still enjoy huge government advantages that make competition in the secondary market impossible. The “g-fees” that Fannie Mae and Freddie Mac charge to guarantee mortgage-backed securities are a central factor in housing finance. The Federal Housing Finance Agency is rumored to be close to announcing a decision about them—but ...

Since 2008 the Fed has run vast, and risky, economic experiments without effective congressional oversight. The calls in Washington to “audit” the Federal Reserve are not for a narrow, bean-counting review of the institution’s financial statements. The audit’s goal is more fundamental: to assure that the checks and balances in a ...

Initially a union idea, the 40-year-old Pension Benefit Guaranty Corp. has a mission impossible. Nat Weinberg, for many years the chief economist of the United Automobile Workers, invented the idea of government insurance of private pensions in 1961. If we are going to negotiate for bigger pensions, which the auto companies may not be able to ...

In spite of all the media reports which say so, the Federal Reserve did not “end” QE yesterday. QE, the Fed’s massive manipulation of the bond market and credit allocation scheme, will not be at an end as long as the Fed’s balance sheet continues to be bloated. Although the Fed has decided not to increase the bloat further, it has not even ...