Taxpayer windfall near end from Fed bond purchases

WASHINGTON >> The Federal Reserve’s bond-buying campaign continues to produce one clear benefit: a windfall for taxpayers. The Fed, which turns over most of its profits to the Treasury Department, said Friday that last year it transferred an estimated $98.7 billion, a record. The Fed’s profits have been large enough to significantly restrain the growth of the federal debt, cutting aggregate deficits by about 8 percent since 2010.

But the good times are nearly over. The Fed’s earnings will decrease as it raises its benchmark interest rate — likely this year. The Congressional Budget Office estimated last year that the Fed’s annual transfers could reach a low point of just $8 billion in 2018. 

The Fed amassed more than $4 trillion in Treasury and mortgage-backed securities in an effort to stimulate economic growth by holding down borrowing costs for businesses and consumers. The purchases are lucrative because the Fed pays for the bonds with money it creates.

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