Bill English on the Effectiveness of QE and the Consequences of Fed Losses
Macro Musings with David Beckworth
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What if the Federal Reserve Books Losses Because of Quantitative Easing?
The Federal Reserve is holding about $8.5 trillion worth of securities at the moment. The Fed looks a little bit like a commercial bank, it has assets that's earning interest on it and liabilities that's paying interest on. So when the Fed raised rates yesterday, they had the effect of reducing their net interest income. And so it's possible if the Fed has to raise rates very quickly to a high level that it ends up with a net interest expense.
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