Repo actions led to 12% drop in net income in ’19, Fed reports – lowest since ’09

$519 million provided to fund CFPB last year

A decrease of $7.6 billion in net income – about 12% – was recorded by the Federal Reserve in 2019 from the previous year, the agency said Friday, which the central bank attributed mostly to a decline in interest income on securities acquired through the Fed’s repurchase agreements action last fall.

The net income was the lowest for the central bank since 2009, when it recorded $47.4 billion. The highest amount was in 2015, when the Fed recorded $97.7 billion.

The Fed said the 2019 $9.5 billion decrease in interest income through the repo acquisitions was joined by a $1.5 billion increase in interest expense resulting from the repo sales. However, a decrease in interest expense – of $3.5 billion – associated with reserve balances held by banks “partially offset those factors,” the Fed said.

According to the Fed, 2019 net income was “derived primarily from $102.8 billion in interest income on securities acquired through open market operations – U.S. Treasury securities, federal agency and government-sponsored enterprise (GSE) mortgage-backed securities, and GSE debt securities.”

The Fed additionally reported the Federal Reserve Banks spent $519 million to fund the operations of the Consumer Financial Protection Bureau (CFPB) in 2019. Also, the banks were assessed $837 million for the costs related to producing, issuing, and retiring currency; and $814 million for Federal Reserve Board spending.

The banks had additional earnings derived from income from services of $444 million; statutory dividends totaled $714 million in 2019, the Fed said.

The reserve banks had interest expense of $35.0 billion which the Fed said was primarily associated with reserve balances held by depository institutions, and incurred interest expense of $6.0 billion on securities sold under agreement to repurchase. Operating expenses of the banks, net of amounts reimbursed by the U.S. Treasury and other entities for services the banks provided as fiscal agents, totaled $4.5 billion in 2019, the Fed said.

Federal Reserve Board announces Reserve Bank income and expense data and transfers to the Treasury for 2019