The Fed Is $245B in the Hole and the Treasury Just Stepped In With $15B

The Federal Reserve losses have reached $245 billion, according to its latest audited financial statement. This brings to light a gap that opened when interest rates began rising in 2022. While the yearly losses are starting to narrow, the gap remains signifcant. It has also changed how money flows between the Fed and the Treasury.

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Americans Pay Debt Interest While the Fed Bleeds $245B Paying Banks

The Fed reported a $19.6 billion loss in 2025. This is down from $77.5 billion in 2024 and $114.6 billion in 2023, as interest costs eased. But the total losses have now reach $245 billion. The central bank has not made signifcant transactions to the Treasury since 2022, the first time payments have stopped since 1934. Analsyts expect that to continue until at least 2027.

It comes down to the Fed balance sheet. During the pandemic, the Fed bought large amount of Treasury and mortgage bonds. When interest rates rose, the cost of paying interest on bank reserves increased faster than the income generated by those assets.

The Fed’s interest expenses remain high, with about $147.7 billion paid to banks on reserve balances in 2025 alone. At the same time, it earned $155 billion from its securities portfolio. But the margins were thin. The Fed’s total securities holdings still stand above $6 trillion even after balance sheet reduction.

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Treasury Executes Record $15 Billion Buyback

At the same time, the Treasury is stepping in to support market functioning. On April 1, the US Treasury completed a $15 billion bond buyback. According to official results, the Treasury accepted the full $15 billion from over $43 billion in submitted offers. The operation mostly focused on bonds maturing between 2026 and 2028, aiming to improve liquidity in less-traded parts of the market.

The move does not reduce the overall debt, which is at $39 trillion. But it helps stabilize parts o fthe market that are harder to trade. For now, the system is adjusting on multiple fronts. The US continues to pay debt interest on its growing obligations while the Fed works through losses tied to its current policy setup.

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