Seniorage Profits: Fed Edition
From What Does It Mean When Monetary Policy Conducts a Fiscal Policy Operation? by Paul McCulley
Wow, $40 billion plus, you say. How does the Fed make all that money? Very simple: its pays no interest on its liabilities, while it receives interest on its assets, notably holdings of U.S. Treasury debt and loans at its discount window (as well as all the other lending facilities opened since last year). Thus, the Fed is – mechanically if not by statute – a subsidiary of the United States Treasury, which implements the expenditure and tax legislation of the Congress.