Fed gives profits to U.S. Treasury

The Federal Reserve’s economic stimulus campaign continued to generate large profits in 2017, helping to reduce the federal deficit, but the windfall is showing signs of tapering.

The Fed, which remits its profits to the Treasury Department, disclosed Wednesday that its payments last year totaled $80.2 billion — about 12 percent less than the $91.5 billion in 2016.

The decline in profits reflects the Fed’s efforts, as the economy gains strength, to conclude the economic stimulus campaign it waged in the wake of the 2008 financial crisis.

The Fed has gradually increased its benchmark interest rate amid an improving economic picture and those higher rates increase what the Fed must pay on deposits that banks keep stashed at the Fed.

The Fed also began last year to gradually reduce the portfolio of Treasurys and mortgage bonds it acquired after the 2008 crisis, reducing the amount of revenue the Fed gets from interest payments on those securities. Those holdings are the source of most of the Fed’s revenues.

The Fed’s contribution to the government’s coffers still remains well above precrisis levels.

The Fed made an average annual contribution to the Treasury Department of $23 billion during the five years preceding the crisis. Since 2010, the average contribution has been $86 billion.