GSE mortgage securities boost record Federal Reserve payment to Treasury

The Federal Reserve Board reported that the Reserve Banks took in $80.9 billion in net income during 2010, up 34% from the year before because of larger returns on government-sponsored entity securities. Of the 2010 earnings, the Fed paid the Treasury Department $78.4 billion, nearly double the amount paid to the Treasury in 2009 and a new record high. The Fed pays the Treasury any excess funds it takes in during the year after operational costs, dividend payments and the amount necessary to even out the amount of surplus to capital paid into the Reserve system. The Fed said most of the income for the year, $76.2 billion, was acquired through investments in mortgage-backed securities backed by Ginnie Mae, Fannie Mae and Freddie Mac. It also generated revenues from Treasury securities and GSE debt securities. Another $7.1 billion in income came from consolidated limited liability companies created in response to the financial crisis. Another $2.1 billion in income was reported from interest on credit extended to American International Group, which received roughly $182 billion during the bailouts. Even though the Treasury received more than $70 billion last year from GSE securities and GSE debt securities, Fannie Mae and Freddie Mac have pulled $148 billion in capital from the Treasury to keep the companies afloat. Their regulator, the Federal Housing Finance Agency, estimates the two companies may need to pull between $221 billion and $363 billion through 2013. Write to Jon Prior. Follow him on Twitter: @JonAPrior