Bill Dudley, Columnist

U.S. Treasury's Golden Fed Goose Is About to Get Cooked

Quantitative easing generated ample income for the government. That’s about to change.

February 17, 2022 at 5:00 AM EST

Bill Dudley, a Bloomberg Opinion columnist, served as president of the Federal Reserve Bank of New York from 2009 to 2018. He is the chair of the Bretton Woods Committee, and has been a nonexecutive director at Swiss bank UBS since 2019.

He’ll have some explaining to do.
Photographer: Brendan Smialowski/Bloomberg

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The U.S. Federal Reserve’s vast securities-purchasing program has had an ancillary benefit beyond stimulating economic growth: It has generated profits for the Treasury, as the income on the securities has exceeded the interest the central bank pays on its liabilities.

Now, though, those profits are set to diminish, and even turn into losses, as the Fed raises short-term interest rates. Technically, this shouldn’t be a problem. Politically, it could be.

Before it’s here, it’s on the Bloomberg Terminal

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