Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Fed Finances topic
No spam. Unsubscribe anytime.
Witnesses flag Fed operating losses and call for congressional review of balance sheet risks
Summary
At the House task force hearing, witnesses raised concerns about the Federal Reserve's reported operating losses, long‑duration asset holdings and proposals such as stopping interest on reserves or recapitalizing the Fed.
Witnesses told a House Financial Services task force hearing that the Federal Reserve’s balance sheet and recent operating losses merit closer congressional scrutiny.
Alex Pollock and other witnesses described large cumulative operating losses at the Fed and urged Congress to require standard accounting and more transparency. Pollock said the Fed’s operating losses had reached roughly $240 billion and called for regular formal oversight of the Fed’s financial statements and consideration of recapitalization.
Pollock described the Fed’s large holdings of long‑dated securities combined with higher short‑term rates as creating a negative net interest margin similar to historical savings‑and‑loan problems. “They invested extremely long at extremely low rates, and they borrowed extremely short,” he said, and called that a source of the losses.
Members and witnesses discussed possible responses raised in testimony, including stopping interest on excess reserves, studying recapitalization, and directing the Fed to exit market‑distorting mortgage holdings. Witnesses cautioned, however, that some actions could have consequences for bank funding and credit conditions: reducing interest on reserves would be disruptive to banks, and Pollock said it could “result in a credit crunch” if not managed carefully.
No formal remedies were adopted at the hearing. Members asked witnesses for additional written detail and analysis; witnesses were asked to return answers to the record by Oct. 22, 2025.
