How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress? Were supplemental...

How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress? Were supplemental funds provided to member banks during the first waves of pandemic relief passed by Congress in the spring of 2020? Please Explain.

Interest rates have been going down recently. How does this affect bank’s profitability?

Expert Solution

The Federal reserve's income is derived mainly from the interest on US government securities that it acquires through the open market operations or by creating bank reserves issued to commercial banks.

The Federal reserve does not get funding through congress budget..The Federal reserve's income is derived mainly from the interest on US government securities that it acquires through the open market operations. The rest of the income, after meeting the expenses, goes to the US treasury.

A supplementary finance plan was made by the Fed in the first wave of the pandemic which provided funds to banks so that they can lend to businesses through pay check protection program.There is no limit to the amount of fund provided under this program.

Changes in interest rate affect the profitability of banks as it increases the cost of funding,reduces return from assets ,as well as lowers the value of equity in a bank.

Rahul Sunny answered 1 year ago

Do you believe that the Federal Reserve should be controlled by Congress?

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How do commercial banks generate profit?

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1. Suppose commercial banks borrow from Federal Reserve Banks at the discount rate. What is the...

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Describe the functions performed by Federal Reserve Banks?

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