Federal Reserve Losses and Monetary Policy | American Enterprise Institute - AEI

Federal Reserve Losses and Monetary Policy | American Enterprise Institute - AEI 

• Past monetary policy decisions have resulted in the Fed suffering more than $140 billion in accumulated cash losses in addition to $1 trillion in unrealized losses on its securities portfolio. 
• The Fed System and the majority of Reserve Banks are technically insolvent on a GAAP basis. (GAAP=generally accepted accounting principles")

Fed officials claim that the Fed’s losses and negative GAAP capital do not compromise its ability to conduct monetary policy because the Fed can create money to cover its losses...

We conclude that the framework will be ignored, and the Fed will continue to operate at a loss while deeply technically insolvent as long as depositors maintain their belief that Fed deposits are protected by an implicit federal government guarantee. 

Congressional action may be needed should this confidence waiver...