At Taxpayers' Expense, Fed Paid Banks $38.5 Billion in Interest on "Reserves" in 2018. Here's How
From WolfStreet:
At Taxpayers Expense, Fed Paid Banks $38.5 Billion in Interest on Reserves in 2018. Heres How
by Wolf Richter Jan 10, 2019 94 Comments
Normally, this would be ironic: The Fed doesnt need to borrow; it creates money when it needs some. So it wouldnt pay interest. But these are not normal times.
The Fed reported its preliminary results this morning for the year 2018. The headline is that it sent $65.4 billion of its profits to the US Treasury Department in 2018, and that this amount had plunged by 18.5% from the remittances, as theyre called, in 2017, and by 44.1% from the peak of $117 billion in 2015.
The Fed earns interest income on the huge pile of securities it holds. After covering operating expenses, interest expenses, and some other items, it is required to remit the rest to the Treasury Department to the taxpayer.
Therefore, the amounts in interest expense the Fed pays the banks on their Excess Reserves and Required Reserves comes out of the taxpayers pocket and its transferred to the banks to become bank profits, and thereby bank executive bonuses and stock holder dividends, funded by the dear taxpayers. And this amount was huge in 2018: $38.5 billion! ..........(more)
https://wolfstreet.com/2019/01/10/fed-paid-banks-38-5-billion-in-interest-on-reserves-in-2018-slickest-annual-wealth-transfer-from-taxpayers-to-banks/