Federal Reserve’s Capital Has Now Plummeted to Negative $121 Billion, and Congress Needs To Act

Meantime the central bank seeks to palm off on the public the idea that its staggering negative capital is a ‘deferred asset.’

AP/Carolyn Kaster
The Federal Reserve chairman, Jerome Powell, at Washington, May 3, 2023, following the Federal Open Market Committee meeting. AP/Carolyn Kaster

Hold up your hand if you think that the aggregate losses of an organization are an asset of that organization. No hands at all? Absolutely right. Losses are not an asset. That’s accounting 101. Yet the greatest central bank in the world, the Federal Reserve, insists on claiming that its continuing losses, which have accumulated to the staggering sum of $164 billion, are an accounting asset.

The Fed seeks to palm off this accounting entry as a “Deferred Asset.” Why does the Fed do this, which perhaps makes it look tricky instead of majestic? Because it does not want to report that it has lost all its $43 billion in capital and now has negative capital. The inevitable arithmetic is plain: start with the Fed’s $43 billion in capital, lose $164 billion, and the capital has inescapably become negative $121 billion. 

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