But Bernanke warns that the central bank’s remittances to taxpayers could fall if interest rates rise too quickly.
The central bank provided the figure as part of its annual audited financial statements released Friday in Washington. The Fed provided a preliminary estimate of an $88.9 billion remittance to taxpayers on Jan. 10. Last year, the Fed returned $75.4 billion to the Treasury.
While the central bank is currently bringing in record profits, Fed Chairman Ben Bernanke warned Congress last month that the Fed’s income may dwindle when it begins to unwind its record balance sheet.
“Federal Reserve analysis shows that remittances to the Treasury could be quite low for a time in some scenarios, particularly if interest rates were to rise quickly,” Bernanke said Feb. 26. “However, even in such scenarios, it is highly likely that average annual remittances over the period affected by the Federal Reserve’s purchases will remain higher than the pre-crisis norm.”
The audit shows the Fed earned $90.6 billion in net income in 2012, with about $80.5 billion in interest income on its securities holdings and $13.3 billion in gains on Treasury sales. The Fed system had $2.9 trillion in assets at the end of 2012, a sum that is growing as Bernanke continues his $85 billion a month bond-buying program aimed at boosting the labor market.
MSCI Inc. of New York, a firm that specializes in portfolio risk analysis, showed the value of Fed holdings shrinking by $547 billion over three years in an adverse scenario that includes an economic contraction and rising inflation.
MSCI put the Fed’s mark-to-market loss at less than half that, or $216 billion, if the economy performs in line with consensus forecasts of gradually rising growth, inflation and interest rates. The adverse and baseline scenarios were taken from the Fed’s own stress tests of the 18 largest banks.
The Fed doesn’t mark its portfolio to market, and its losses may be only a fraction of MSCI’s totals because the central bank could hold the bulk of its assets to maturity. The central bank cannot go bankrupt and can continue to operate with losses on its books.
The audited financial statements show the central bank currently has an unrealized gain of $214.5 billion on its assets.