By Wolf Richter for WOLF STREET
But losses don’t matter to the Fed. The Fed creates its own money, and so it cannot become insolvent. And its capital, which is capped by Congress, is not impacted by the losses because the Fed carries the losses as a “deferred asset” in a liability account on its balance sheet, rather than taking the losses against capital. So its “total capital” on its balance sheet has actually ticked up by $1 billion over the past 12 months to $42.8 billion.
The losses do matter to the Treasury Department though – which is no longer getting the remittances from the Fed. And so the Fed’s losses are swelling the deficit and the debt indirectly via the absence of remittances for years to come.