Fed projects $80.2 billion payment to Treasury for 2017

FILE - This Friday, June 19, 2015, file photo shows the Marriner S. Eccles Federal Reserve Board Building in Washington. The Federal Reserve says the payments it will make to the federal government based on its 2017 operations will drop to $80.2 billion, down 12.3 percent from 2016. (AP Photo/Andrew Harnik, File)

WASHINGTON — The Federal Reserve said Wednesday the payments it will make to the federal government based on its 2017 operations will drop to $80.2 billion, down 12.3 percent from 2016.

It will be the second year that the payments have declined although they still remain about three times higher than the level in effect before 2008, when the Fed began a massive expansion of its bond holdings.

After covering its own operating costs, the Fed sends the Treasury its remaining profits each year, money that is used to lower the government's budget deficit.

The Fed said higher interest payments to banks on their reserves were a major reason for the drop in payments to the government. The $80.2 billion is preliminary and may change slightly when final results are released in March.

Based on the preliminary figures, the Fed said it earned $80.7 billion in net income in 2017, a drop of $11.7 billion from 2016. That decline reflected an increase of $13.8 billion in interest payments the Fed made to banks which was partially offset by an increase of $2.5 billion in the interest income the Fed earned on its holdings of Treasury bonds and mortgage-backed securities.

The Fed said operating expenses for the Fed system, which covers 12 regional banks, totaled $4.1 billion in 2017. In addition the 12 regional banks were assessed $724 million to cover costs related to producing and issuing currency. In addition, the Fed's payments to fund the operations of the Consumer Financial Protection Bureau totaled $573 million.

The Fed's bond holdings increased five-fold to $4.5 trillion starting in late 2008 as the central bank engaged in three rounds of bond purchases aimed at lowering long-term interest rates to help the country emerge from the Great Recession.

Starting last October, the Fed has been gradually trimming its bond holdings by not re-investing a portion of its maturing securities. But the holdings still total $4.4 trillion, far above the levels in effect before the 2008 financial crisis hit.

Must Read

Pfizer spends $14B on Medivation in cancer fight

Aug 22, 2016

Pfizer will pay about $14 billion to buy cancer drug developer Medivation as it fortifies its hold...

UN: Thousands of Central American children seek to enter US

Aug 23, 2016

UN children's agency says thousands of children trying to escape gang violence and poverty in...

Navy gets $2.7B attack submarine sponsored by Michelle Obama

Aug 27, 2016

A Connecticut company has delivered to the U.S. Navy an attack submarine that is sponsored by first...

European ships rescue thousands of migrants off Libyan coast

Aug 29, 2016

Italian naval ships along with vessels from non-government groups rescue thousands of migrants off...

Why the EU's tax probe of Apple and others is raising US ire

Aug 30, 2016

The European Union's crackdown on corporate tax avoidance has landed on Apple with its demand that...

Weather, 20 December
Houston Weather
+7

High: +11° Low: -2°

Humidity: 83%

Wind: NNE - 7 KPH

Canberra Weather
+27

High: +27° Low: +17°

Humidity: 87%

Wind: W - 20 KPH

Roissy-en-France Weather
+6

High: +6° Low: -5°

Humidity: 87%

Wind: ENE - 7 KPH

Florence Weather
+9

High: +9° Low: +6°

Humidity: 97%

Wind: ENE - 17 KPH

Parga Weather
+7

High: +16° Low: +4°

Humidity: 100%

Wind: SE - 25 KPH