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US Federal Reserve logged $105b profit on its bonds last year

Published on Apr 18, 2014 2:37 AM

NEW YORK (REUTERS) - The Federal Reserve logged US$84 billion (S$105 billion) in net profit last year on its massive portfolio of assets, and average income will probably remain higher than before the financial crisis for another decade to come, according to an annual report.

While the New York Fed's report on its open market operations, released on Thursday, painted an optimistic picture of what could be a thorny political issue for the US central bank, it noted that the portfolio would have logged an unrealised loss of US$53 billion had the Fed been forced to "mark to market" its assets, as private firms do under law.

It was the first time the Fed formally acknowledged unrealised losses. But since it is not required to use current market prices in its accounting, and it did not sell any assets, for now the Fed continues to transfer profits to the government.

The Fed has swollen its overall balance sheet to more than US$4 trillion since the depths of the financial crisis in 2008 to lower borrowing costs across the economy, and to encourage hiring and growth. "The large size of the SOMA portfolio (System Open Market Account), its considerable holdings of longer-term securities, and the low interest rates paid on the Federal Reserve's interest-bearing liabilities continued to generate high portfolio net income, which totaled US$84 billion in 2013," the report said.

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