How the Fed Works

How does the Fed support itself?

In order to remain independent of the U.S. government, the Federal Reserve totally supports itself. It generates its income for the most part from interest. This interest comes from many sources, including:

Government securities that it acquires through open market operations
Foreign currency investments
Bank/depository institution loans that the Fed makes using the discount rate

The Fed is also paid fees for services it provides such as funds transfers (Fedwire), check processing, and automated clearinghouse (ACH) operations. (ACH options are electronic alternatives to the paper-based check system. Examples include automatic payroll deposits and electronic bill paying.)

Any money the Fed has left over after it pays all of its expenses are sent to the U.S. Treasury. Since the Federal Reserve System began in 1914, about 95 percent of the Reserve Banks' net earnings have ended up being paid into the Treasury.

Information about the income and expenses of the Federal Reserve Board can be found in the Board of Governor's Annual Report.