Deferred Assets are now $160 billion

"Deferred Assets" is the politically correct term for cumulative losses by the Federal Reserve.  The number was $133 billion on 12/31/23 and it is now (as of 3/31/24) $160 billion.  So the Fed lost $27 billion for the quarter.  Most of this loss is because the Fed paid out more in interest to banks who have reserves at the Fed, than it received in interest on its assets, which are Treasury securities that it owns as well as mortgage-backed securities.  This is a subsidy to banks, many of which are struggling with losses on their bond portfolios.  

The Fed is supposed to be accountable to Congress.  Before 2023 they would pay their profits to the US Treasury. (They have paid more than $1 trillion to the Treasury since 2000).  But the Deferred Assets is a shield to protect it from Treasury oversight.  The Fed has really declared itself independent of the US government.  (Not totally independent because the Board of Governors is nominated by the president, and because the Fed feels obligated to purchase Treasury bonds).  And in some ways it is superior to the US government - it can spend as much money as it wants and is accountable to nobody, whereas the Treasury gets money only by taxes and by borrowing (at interest).

The Fed supposedly will cover the deferred assets by 2027.  But what if it doesn't - what if it keeps losing money and keeps growing into an out of control monster?  Nobody else seems worried about this, they think the losses will max out at about $200 billion before the Fed turns profitable again.  I think we should keep an eye on it.  

Note that the losses in the March 31 2024 quarter were $27 billion, the same as in the December 31 2023 quarter.  So they aren't decreasing.

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The Supreme Court just blessed the funding of the Consumer Financial Protection Bureau.  The CFPB sucks up about $700 million per year and it adds to the losses of the Fed.  What if the CFPB is just the start and other government agencies also get funded by the Fed?

Why not mandate that the Federal Reserve cover the losses in Social Security after 2035?  It's free money right?  What could go wrong with this scheme?  Could it cause hyperinflation?  Are we at the edge of a black hole getting ready to be sucked in?

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One economist thinks that losses could continue "well into the next decade".  "The longer rates stay high, however, the harder it will be for the Fed to repair its balance sheet. Importantly, restrictive rates also could end up costing the Fed around $100 billion a year well into the next decade, according to Ali Meli, chief investment officer of Monachil Capital Partners, a credit fund he founded in 2019."

https://www.msn.com/en-us/money/markets/fed-s-1-trillion-pile-of-paper-losses-are-turning-into-actual-losses-with-more-in-sight/ar-BB1o6w8P

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Update: The current balance (as of 6/12/24) of "Earnings Remittances Due to the U.S. Treasury" (https://fred.stlouisfed.org/series/RESPPLLOPNWW) are negative $174.86 billion.   So the rate of change is about negative $6 billion per month, which is better than negative $9 billion per month.  

When will the rate of change hit zero? I think about January 1, 2025, when the total will reach about negative $200 billion and then will slowly start going back to zero, which it should hit about January 1, 2027.

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Here is another article about it: https://wallstreetonparade.com/2024/06/the-fed-posts-historic-operating-losses-as-it-pays-out-5-40-percent-interest-to-banks/