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I read a rumor on a forum that the Federal Reserve has recently (since the pandemic) been waiving interest payments on its portfolio of US treasury bonds and notes.

I was unable to verify this rumor one way or the other. Is there any substance to it?

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It is not waving them but it is remitting them back to the treasury. Waving would mean treasury does not have to pay the interest. Remittance means that even though treasury pays the interest rate they get it back.

Hence treasury does have to pay the interest but since Fed is government institution all Fed profits are transferred to the treasury. Fed is not just sending treasury the profits from interest but all of its net earnings.

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  • $\begingroup$ Ok, wait a minute. I thought that the Federal Reserve only remits its PROFITS back to the Treasury. Profit is not the same thing as revenue. $\endgroup$
    – Lassie Fair
    Commented May 11, 2022 at 13:31
  • $\begingroup$ @LassieFair yes I never claimed it is, however Fed costs are trivial it’s just budget for staff, offices etc. excluding the remittance to the government which is considered expense on Fed balance sheet the Fed operational costs are less than 2% of their revenue (and Fed gets revenue also from lending to private banks not just government). Even just the revenue on debts issued to private institutions is large enough to pay for the operating costs several times over and in essence if Fed would not subtract these costs it would anyway have to be subsidized by gov as other gov institutions so $\endgroup$
    – 1muflon1 ♦
    Commented May 11, 2022 at 13:52
  • $\begingroup$ Treasury in practice gets all its interest back and then some more. Yes it does not get all revenue as some has to be set aside for its operation but the amounts are trivial. On net basis Fed is money maker for treasury anyway $\endgroup$
    – 1muflon1 ♦
    Commented May 11, 2022 at 13:53

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