A Primer on Federal Reserve Remittances
1. Introduction
Corporate profits serve as a widely watched barometer of American business. As reported in the national accounts — the official economic ledgers the Bureau of Economic Analysis (BEA) compiles — they appear to measure the earnings of American companies. But that headline figure contains something that is not a business at all: the net earnings of the Federal Reserve.
The BEA counts the Fed alongside banks, manufacturers, retailers, and every other company, so when the Fed earns a great deal, corporate profits rise. When the Fed loses money, as it has since late 2022, corporate profits fall. Since 2023, setting the Fed aside leaves corporate profits higher than the reported total, enough to change the story the number tells about how profitable American companies really are, though that distortion has shrunk recently.
The Fed’s payments to the Treasury are easy to overlook and easy to misread. The same dollars surface in more than one place: as the Federal Reserve’s net earnings, as a slice of the nation’s corporate profits, and, until 2018, as a line in the corporate-tax accounts. When the Fed was profitable, those figures rose together; when it swung to losses, the two that still exist fell together. The payments themselves are now near zero, but the Fed’s imprint on the corporate-profits statistic has not gone away. Anyone who reads that statistic, and many do, needs to know that a central bank is sitting inside it, and to take the Fed out before drawing conclusions.
Where do these central-bank earnings come from, why did they recently turn to losses, and how much do they move the corporate-profits number? Answering each question means following the money the Fed sends to the US Treasury each year, known as its remittances.
This explainer measures how much these remittances distort the corporate-profits figure. It then explains what remittances are and where they originate, how the balance sheet the Fed built after 2008 made them so large, why the rate increases that began in 2022 stopped them, what the Fed does with the resulting losses, and how those losses ultimately get counted in corporate profits.
2. How Much the Fed Moves the Corporate Profit Number
According to the BEA, in 2021 the Fed added about $108 billion to corporate profits and in 2022, the year inflation peaked, it added about $59 billion. Those were the years when high corporate profits fueled charges of “greedflation,” the claim that companies were driving inflation by padding their profit margins. Whatever one makes of that debate, part of the profit totals cited in it was not private profit at all but the earnings of the Federal Reserve.
In 2023, things swung the other way, with the Federal Reserve’s losses subtracting about $115 billion from corporate profits. That swing is large enough to flip the published picture: set the Fed aside, and corporate profits in 2023 come to about $4,003 billion, above the reported total of about $3,888 billion. Both figures are corporate profits with the inventory valuation adjustment, the basis BEA uses in NIPA Table 6.16D, which strips price-driven inventory gains out of profits. The same inversion held in 2024 and 2025, but by a shrinking margin as the Fed’s losses faded: the Fed subtracted about $78 billion in 2024 and about $23 billion in 2025.
As Figure 1 (next page) shows, the headline figure can mislead in both directions. Through 2022, it overstated the earnings of American business, increasing the profit totals at the center of the greedflation debate. By contrast, in 2023, 2024, and 2025, it understated them. Taking the headline figure at face value would have overstated how well businesses were doing in 2021 and 2022 and understated how well they were doing in the years since.
Figure 1: Corporate Profits with and without the Fed’s Earnings
(2018–2025)
Source: BEA, NIPA Table 6.16D. Corporate profits with inventory valuation adjustment.
This distortion is easy to miss because, from the federal government’s point of view, the Fed’s swings largely wash out. Much of the Fed’s income is interest the Treasury pays on the government bonds the Fed owns, in effect, one arm of the government paying another. Combine the Treasury’s books with the Fed’s, and the federal government’s overall finances change far less than either set of numbers alone would suggest.
Corporate profits, however, are not a government account. They are a measure of the business sector, and they include the Fed’s earnings rather than netting them out. As a result, a statistic meant to track private enterprise ends up including the central bank’s earnings and therefore distorts what corporate profits tell us about how well the private sector is doing.
3. What Are Fed Remittances?
The Federal Reserve System consists of a Board of Governors in Washington, DC, and 12 regional Federal Reserve Banks. Together they hold a large portfolio of securities that earn interest. The securities are mostly US Treasury bonds and mortgage-backed securities. From this income, the Fed covers its operating expenses and pays a dividend, set by law, to the member banks that hold stock in the regional Reserve Banks. Whatever is left, after the Fed sets aside a small cushion of capital. The Fed sends to the Treasury. Those payments are its remittances. Those same earnings are what the BEA includes in the nation’s corporate-profits total, which is why the size of the Fed’s surplus matters for measuring corporate profitability.
Much of this income comes in the form of seigniorage, the revenue a government earns from issuing money. The Fed buys interest-bearing assets and funds part of them with liabilities that cost it nothing, above all, the paper currency in circulation. Households and businesses hold Federal Reserve notes without earning interest on them, while the Fed earns a return on the assets it holds against those notes. Net of the cost of supplying the currency, that return is revenue, much of which has historically reached the Treasury.
Not all of the remittance revenue is seigniorage in this strict sense, however. That description fits only one of the Fed’s liabilities: currency in circulation. The asset side imposes a second qualification. A large share of the Fed’s portfolio is Treasury bonds, and the interest on those bonds is paid by the Treasury itself. When that interest returns to the Treasury as a remittance, the government has simply paid itself, leaving its net position unchanged.
The genuine gain is the interest the Treasury avoids paying because part of the government’s liabilities are costless currency rather than bonds — in effect, revenue it obtains without levying an explicit tax. The Fed also earns whatever spread separates the yield on its assets from the cost of its remaining liabilities, but that spread is compensation for the interest-rate risk of funding long-term assets with short-term ones, and it can just as easily run the other way. The distinction became relevant in 2008, when the Fed began paying interest on a second, much larger class of liabilities: reserves, the deposits that commercial banks themselves keep at the Fed.
4. How Remittances Grew So Large
Before 2008, the Federal Reserve’s balance sheet — its total holdings of securities and other assets — was modest, on the order of $900 billion, and bank reserves were scarce and earned no interest from the Fed. The financial crisis changed both facts. Through successive rounds of large-scale asset purchases, commonly called quantitative easing, the Fed bought trillions of dollars in Treasury and mortgage-backed securities, and by the time the last of those programs ended in 2014, its balance sheet had grown to roughly $4.5 trillion. A second and faster expansion followed in 2020, when the Fed met the pandemic with another round of purchases that carried the balance sheet to a peak of nearly $9 trillion in April 2022.
The Fed paid for those securities by crediting the accounts of the commercial banks through which the sales of those securities settled; whoever sold the bonds to the Fed got paid through a bank, and the banking system as a whole ended up holding far more reserves than before. As a result, reserves grew from a scarce resource into an abundant one.
That expansion came with a change in how the Fed steers interest rates. Under the floor system adopted after 2008, the Fed no longer keeps reserves scarce to set its policy rate; instead, it pays banks interest on the reserves they hold, the interest on reserve balances, or IORB. A bank will not lend reserves for less than it can earn by leaving them at the Fed, so that rate sets a floor under short-term rates, in principle. In practice, the floor isn’t binding because government-sponsored enterprises and other lenders are not eligible for IORB and are thus willing to lend below it. A companion facility, the overnight reverse repurchase agreement facility, or ON RRP, pays a slightly lower rate to money-market funds and others that cannot hold cash as reserves at the Fed directly, pulling the floor down to that level. ON RRP balances were very large in 2022 and 2023 and have since fallen close to zero.
So long as the rate the Fed paid on reserves stayed well below the yield on its securities, this arrangement was highly profitable. A multitrillion-dollar portfolio of higher-yielding bonds, funded by currency and reserves that cost the Fed little, threw off substantial net income. That is why the Fed’s net earnings climbed as its balance sheet grew, reaching roughly $108 billion in 2021 (see Figure 2, below). In that year, the portfolio earned about $122 billion in interest while the Fed paid only about $6 billion in interest expense; after operating costs and the member-bank dividend, what remained was net earnings of about $108 billion, nearly all of it sent to the Treasury and, in turn, folded into the national corporate-profits total. But the same structure carried a hidden vulnerability: the Fed’s costs would climb with the interest rate it paid on reserves. When that rate rose, as the next section describes, the arrangement reversed.
Figure 2: Federal Reserve Net Earnings (1998–2025)
Source: BEA.
5. Why the Payments Stopped
The reversal came with the Fed’s campaign against inflation. Beginning in 2022, the Fed raised its policy rate rapidly, which under the floor system meant raising the interest it pays on reserves and reverse repos. Those payments are its main expense, and they rose sharply, while its income stayed locked in by a portfolio bought earlier at low yields. As the rate paid on reserves climbed above the average yield on that portfolio, expense overtook income. On an annual basis, the two lines crossed in 2023 (see Figure 3, below), when the Fed took in about $163.8 billion in interest income and paid out about $281.1 billion in interest expense; after its other income and operating costs, the loss for the year came to about $115 billion.
Figure 3: Federal Reserve Interest Income and Interest Expense
(2016–2025)
Source: Federal Reserve Board, annual Reserve Bank income and expense releases and the Federal Reserve System’s audited annual financial statements. Interest income is interest earned on securities held in the System Open Market Account. Interest expense is interest paid on reserve balances plus interest on securities sold under agreements to repurchase. Figures for2025 come from the audited statements released March 25, 2026.
A central bank that loses money does not stop operating, nor does it bill the Treasury for the shortfall. Instead, the Fed records what it calls a deferred asset: an accounting entry for the future earnings it must recover before it can resume payments to the Treasury. As losses pile up, the deferred asset grows, and remittances are suspended until it has been worked off. Most Reserve Banks halted their weekly remittances in September 2022, and the deferred asset has climbed steadily since, from about $19 billion at the end of 2022 to roughly $243 billion at the end of 2025. It peaked at about $246 billion in the week ending January 28, 2026, and has fallen since, to about $233 billion as of the August 5, 2026 release (see Figure 4, below).
Figure 4: The Federal Reserve’s Deferred Asset (2022–2026)
Source: Federal Reserve, H.4.1, ‘Earnings remittances due to the US Treasury.’ Published as a negative liability; the sign is reversed here so the deferred asset appears as a positive value.
Cash payments to the Treasury did not fall to exactly zero. The Reserve Banks still transferred about $76 billion in 2022, most of it earned before the suspension took hold in September. After that the flow nearly stopped: under $1 billion in 2023, and only a few billion a year since, sent by the handful of Reserve Banks that turned a profit in particular weeks.
But the net-remittances line in the Fed’s own audited financial statements turned sharply negative in the loss years. That negative figure is an accounting accrual, the building of the deferred asset, not money flowing in either direction between the Fed and the Treasury.
6. The Deferred Asset
These losses do not threaten the Fed’s solvency, and the reason why shows just how different a central bank is from the companies it shares the corporate-profits statistic with. When an ordinary company loses money, the loss comes out of its capital, the shareholders’ stake in the firm, and losses on this scale would push it toward insolvency. The Fed’s books work differently: the deferred asset charges its losses against future remittances to the Treasury rather than against its own capital. The entry records the earnings the Fed must recover before payments resume, and because the losses accumulate there, the Fed’s stated capital holds steady while the losses mount. An ordinary company can book a deferred tax asset against expected future earnings, but the Fed’s entry is different in kind: it is owed by no counterparty, it is recoverable only out of the Fed’s own future profits, and it keeps losses off the capital account entirely rather than reducing it. Behind the accounting stands a more basic fact: a central bank that issues its own currency cannot be forced to default on obligations in that currency. Even if its capital turned negative, the Fed would keep conducting policy and paying its bills.
The cost of the Fed’s losses shows up instead in the federal budget. In the decade before the losses began, the Fed sent the Treasury between roughly $55 billion and $100 billion a year. Those receipts have all but disappeared, so the Treasury must borrow to cover the gap each year until the deferred asset is worked off and remittances resume. How long that takes depends on interest rates and the size of the Fed’s balance sheet. In its February 2026 baseline, which revised remittances up because of lower expected short-term rates, the Congressional Budget Office estimated that remittances would stay below $10 billion a year through 2028 and not return to their old scale, near the top of that range, until the early 2030s.
7. How the Fed Gets Into Corporate Profits
Those losses did more than stop the checks to the Treasury; the same swing from profit to loss reaches straight into the national corporate-profits total. To see how, start with the way the BEA treats the Fed. It counts the 12 regional Reserve Banks as corporations, so their net earnings are folded into the national total for corporate profits, alongside the profits of banks, manufacturers, and every other company; the Fed’s share sits on a dedicated line of the accounts (NIPA Table 6.16D). In short, the headline corporate-profits figure already has the Fed’s profit or loss built into it.
The payments the Fed sends to the Treasury appear elsewhere, on the receipts side of the federal government’s accounts, recorded as a dividend the government collects (NIPA Table 3.2). The check the Fed writes to the Treasury lands on the government’s income side, like any other payment it receives.
Nothing is counted twice in this arrangement, though it can look that way at first. The accounts measure the Fed’s earnings once, as profit. The remittance is then recorded as a distribution of that profit, a dividend paid out of earnings already counted, just as an ordinary company’s profit is measured once even though the dividend paid from it also shows up in shareholders’ income. The corporate-profits total is not reduced when the dividend goes out the door, because profits track what an enterprise earned, not what it kept.
One historical wrinkle is worth noting, to head off a common confusion: recording the Fed’s payment to the Treasury as a dividend on the government’s receipts is a recent convention. Before the BEA’s comprehensive revision of the accounts in 2018, those payments appeared in the government’s accounts as corporate income tax, and in their last year inside that line, 2017, the Fed contributed about $83.5 billion of roughly $401 billion in total corporate-income-tax receipts (as published before the 2018 revision; in the current vintage of the same series, with the Fed’s payment removed, 2017 taxes on corporate income total about $297 billion).
The change was purely definitional: the BEA reclassified the payments “as dividend payments, rather than as tax payments.” Since then, the payment has appeared in no tax series at all, so it should not be mistaken for a tax the Fed currently pays. What did not change is the earnings side: whatever the label on the payment, the Fed’s net earnings remain part of the national corporate-profits total.
8. Reading Corporate Profits Correctly
The Federal Reserve’s remittances are easy to overlook, but they leave a large mark on one of the most-watched measures of business conditions. They added roughly $108 billion to corporate profits in 2021and subtracted about $115 billion in 2023, a swing wide enough to change whether American business looks like it is thriving or faltering.
The distortion is not an accounting mistake. The BEA treats the Reserve Banks as what they are on paper: corporations that earn income, cover their costs, and hand over what is left. But the Fed’s income and costs move for reasons that have nothing to do with how private firms are doing. When its portfolio was large and its funding cost almost nothing, the Fed looked like one of the most profitable companies in the country. When short-term rates rose, the same portfolio produced the largest losses in its history. Neither swing had anything to do with how American companies were performing.
Anyone using corporate profits to size up the business sector should strip the Fed’s earnings out first. Otherwise, a swing in monetary policy can masquerade as a change in the fortunes of private enterprise.
