The Fed’s bond-buying program broke the $3 trillion mark for the first time as it implemented its open-ended bond purchasing program. Total Fed assets grew by $48 billion this week on January 23.
No other Fed program designed to boost the economy has been this extreme since Paul Volcker announced the Fed would hike interest rates until inflation was defeated. Volcker was Fed chief from 1979 to 1987.
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The current Fed is determined to continue its bond-buying program until the unemployment rate comes down substantially.
The Fed uses interest income from its holdings to pay its expenses, then sends what’s left over to the Treasury. In 2012, taxpayers received $88.9 billion in the form of Treasury contributions by the Fed.
The Fed’s balance sheet is now three times its size since before the 2008 crisis.
One risk cited by researchers in the Fed’s monetary affairs division is the possibility that the Fed’s interest income payments to the Treasury
could disappear as interest rates rise over the coming years.
The payments would likely decline over a period of years until they reach zero at certain times.