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Over the past few years, the Fed has been hugely profitable, sending more than $50 billion annually to the Treasury. The Wall Street Journal reports today that this gravy train may come to an end a few years from now, but don’t shed too many tears for the folks in the Eccles building:
If the Fed were to record a loss, it could print its own money to cover its expenses—at no cost to the Treasury. The Fed would record a loss as a deferred asset, which would represent how much money the Fed would need to make up before it started sending profits to the Treasury again.
How great is that to be an agency that can just twiddle a few bits in its computer system whenever it needs to cover its budget? Sure, you knew already that the Fed could print money, but this makes it all a little bit more concrete, doesn’t it?
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