How much US debt the Fed owns

Why the central bank holds government debt at all

Owning Treasury securities is how the Federal Reserve implements monetary policy. It buys them in the open market, never directly at Treasury auctions, and pays for them by creating bank reserves. Before 2008 the holdings were modest and grew slowly with the economy. After the financial crisis, and again in 2020, the Fed bought on a vast scale to push down long-term interest rates — the policy known as quantitative easing.

From mid-2022 it let securities mature without replacing them, shrinking its balance sheet. Over the most recent twelve months its Treasury holdings came out $356.57 billion higher.

What it means for the budget

The Treasury pays interest on the securities the Fed holds, like on any other. But the Fed normally returns its profits to the Treasury after covering its costs, so for years much of that interest effectively came back. When interest rates rose, the Fed began paying more on bank reserves than it earned on its older bonds, stopped those payments and started recording the shortfall as a deferred asset, to be recovered from future profits.

Is this the Fed printing money for the government?

That is the central question critics raise. The Fed argues its purchases serve monetary policy, not government financing, and the law forbids it from buying directly from the Treasury. Critics answer that when a central bank holds a large share of the debt, the difference becomes hard to see. The glossary entry on debt monetization sets out both sides.

Common questions