skip to main navigation skip to secondary navigation skip to content
Board of Governors of the Federal Reserve System


This publication provides current budgeted expenses of the Federal Reserve Board of Governors and the Federal Reserve Banks, as well as the previous year's income and expenses for both the Board and the Banks. It also describes their budgeting process and shows trends in their expenses and employment. For a comprehensive report on the Board and Reserve Bank's operations and activities during the year, see the Annual Report of the Board of Governors of the Federal Reserve System at

Overview of the Federal Reserve System

The Federal Reserve System--the nation's central bank--consists of the Board of Governors in Washington, DC, the 12 Federal Reserve Banks and their 24 branches distributed throughout the nation, the Federal Open Market Committee (FOMC), and three advisory councils--the Federal Advisory Council, the Community Depository Institutions Advisory Council,1 and the Consumer Advisory Council. The System was created in 1913 by the Congress to establish a safe and flexible monetary and banking system. Over the years, the Congress has adjusted the Federal Reserve's authority and responsibility to help achieve broad national economic and financial objectives.

As the nation's central bank, the Federal Reserve System has numerous, varied responsibilities, including

  • conducting the nation's monetary policy by influencing monetary and credit conditions in the economy in pursuit of full employment and stable prices;
  • supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the rights of consumers;
  • maintaining the stability of the financial system and containing systemic risk that may arise in financial markets; and
  • providing certain financial services to the U.S. government, U.S. financial institutions, and foreign official institutions.

The Federal Reserve System plays a major role in the nation's payment system. The Federal Reserve Board issues currency to the Reserve Banks. The Reserve Banks distribute currency and coin to financial institutions; process Fedwire funds, automated clearinghouse, and securities transfers; and collect checks. In addition, the Reserve Banks serve as the fiscal agents of the United States and perform a variety of financial services for the U.S. Treasury, other government agencies, and other fiscal principals. For a more detailed discussion of the Federal Reserve's responsibilities, visit the Board's website at

Back to section top

Summary of 2010 Income and Expenditures

In carrying out its responsibilities in 2010, the Federal Reserve System incurred $3.2 billion in net expenses. Total spending of $4.2 billion was offset by $1.0 billion in revenue from priced services, claims for reimbursement, and other income. Total 2010 expenses were $132.0 million, or 3.0 percent, less than the amount budgeted for 2010 (table 1).

Table 1. Total expenses of the Federal Reserve System, 2010
Millions of dollars, except as noted
Budgeted Actual Variance
Amount Percent
Reserve Banks 3,221.3 3,183.0 -38.3 -1.2
Board1 451.1 437.4 -13.7 -3.0
Currency 702.9 622.9 -80.0 -11.4
Total System expenses 4,375.3 4,243.3 -132.0 -3.0

Note: Components may not sum to totals and may not yield percentages shown because of rounding.

1. During 2010, the Board approved an increase of $6.9 million, or 1.6 percent, in the Board's initial operating budget of $444.2 million (see table 4 in the "Board of Governors Budgets" section). Return to table

The Reserve Banks' current income in 2010 was $79.3 billion.2 The major sources of income were interest earnings from the portfolio of U.S. government securities ($29.9 billion) and federal agency mortgage-backed securities ($44.8 billion) in the System Open Market Account. Earnings in excess of expenses, dividends, and surplus are transferred to the U.S. Treasury--in 2010, a total of $79.3 billion. (These net earnings are treated as receipts in the U.S. budget accounting system when received and as anticipated earnings projected by the Office of Management and Budget in the U.S. budget.)

Back to section top

Operational Areas

In 2010, the Federal Reserve System reported costs using the following categories: monetary and economic policy, supervision and regulation of financial institutions, services to financial institutions and the public, services to the U.S. Treasury and other government agencies, and System policy direction and oversight.

Monetary and Economic Policy

The monetary and economic policy operational area encompasses Federal Reserve actions to influence the availability and cost of money and credit in the pursuit of the nation's objectives of maximum employment, stable prices, and moderate long-term interest rates. During 2010, the economy continued to recover from the deep recession triggered by the financial crisis, albeit at an uneven pace. The Federal Open Market Committee (FOMC) held eight regularly scheduled meetings in 2010, plus two additional meetings by videoconference.3

To promote continued economic recovery, the FOMC maintained the target range for the federal funds rate at 0 to 1/4 percent throughout the year. With the federal funds rate virtually at its lowest possible level, the FOMC continued the large-scale purchases of federal agency debt and agency mortgage-backed securities it had initiated in late 2008 and early 2009 in order to improve market functioning and provide additional stimulus to the economy. These purchases were completed in the first quarter of 2010. The slowdown in the pace of the recovery around mid-year suggested that the Federal Reserve could well fall short of its statutory mandate of maximum employment and price stability for some time. In response, last August, the Federal Reserve began to reinvest principal payments on agency debt and agency-backed mortgage-backed securities holdings in longer-term Treasury securities, so as to keep the size of its securities holdings roughly constant and so avoid an undesirable tightening of monetary conditions. And in November, the Committee announced that it intended to purchase an additional $600 billion in longer-term Treasury securities by the end of the second quarter of 2011 in order to provide additional support to the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

In light of improved functioning in the U.S. financial markets, the Federal Reserve in early 2010 closed most of its extraordinary liquidity programs. These facilities included the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, the Term Auction Facility, and the Term Securities Lending Facility. The final operations of the Term Asset-Backed Securities Loan Facility were held prior to mid-year. The liquidity swap lines with foreign central banks that had been established during the crisis expired on February 1, 2010. However, market concerns about the fiscal challenges facing some peripheral European nations increased in the spring, leading to some strains in European interbank funding markets. Against this backdrop, the Federal Reserve in May 2010 reestablished dollar liquidity swap lines with five foreign central banks.

The wind-down of the Federal Reserve's liquidity facilities tended to reduce the size of the Federal Reserve's balance sheet in 2010, but that tendency was about offset by large-scale asset purchases, leaving the stock of reserve balances little changed at a very high level over the year. Although the FOMC continued to anticipate that economic conditions were likely to warrant exceptionally low levels of the federal funds rate for an extended period, the Board and the FOMC developed tools, including reverse repurchase agreements with a range of counterparties and a new term deposit facility, that will allow the Federal Reserve to reduce the supply of reserve balances, if needed, when it becomes appropriate to begin removing monetary accommodation. Tests of both reverse repurchase agreements and the term deposit facility were conducted over the course of 2010 to ensure the effectiveness of the tools and to provide eligible institutions with an opportunity to gain familiarity with the procedures.

The Board and the FOMC base their monetary policy decisions on high-quality research and thorough analysis of economic and financial data. A vast amount of banking and financial data flows through the Reserve Banks to the Board, where the data are compiled and made available to the public. The research staffs at the Board and at the Banks use the data, along with information collected by other public and private institutions, to assess the state of the economy and the relationships between the financial markets and economic activity. Staff members provide background information to the Board of Governors and the FOMC by preparing detailed economic and financial analyses and projections for the domestic economy and international markets. The Board and the FOMC use these analyses and projections in establishing the appropriate stance for monetary policy. Staff members also conduct longer-run economic studies on regional, national, and international issues.

To improve the Federal Reserve's monitoring of the financial system and to coordinate work bearing on financial stability, the Board last November created the Office of Financial Stability Policy and Research (OFSPR). This office brings together staff with a range of backgrounds and skills--including economists, banking supervisors, and market experts--and works closely with other groups throughout the Federal Reserve System. It helps monitor financial risks and analyze the implications of those risks for financial stability. It also supports the Federal Reserve Board Chairman's role as a member of the Financial Stability Oversight Council, a collaborative body created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to bridge regulatory gaps and monitor systemic risks. In addition, the OFSPR helps develop and evaluate alternative approaches to implementing macroprudential regulations and works with bank supervisory committees on a variety of issues, such as developing quantitative loss models and alternative scenarios to serve as the basis for stress tests.

Back to section top

Supervision and Regulation of Financial Institutions

The Federal Reserve plays a major role in the supervision and regulation of banks and bank holding companies. The Board of Governors adopts regulations to carry out statutory directives, and establishes System supervisory and regulatory policies. The Reserve Banks conduct on-site examinations and inspections of state member banks and bank holding companies; review applications for mergers, acquisitions, and changes in control from banks and bank holding companies; and take formal supervisory actions. In 2010, the Federal Reserve conducted 722 examinations of state member banks (some of them jointly with state agencies), 654 inspections of large bank holding companies, and 3,199 inspections of small, noncomplex bank holding companies; it acted on 699 proposals, representing 1,366 individual applications involving bank holding company formations and acquisitions, bank mergers, and other transactions.

The Board also enforces compliance by state member banks and certain foreign banking organizations with federal laws protecting consumers who use credit and deposit accounts. During the reporting period from July 1, 2009, to June 30, 2010, the System conducted 300 consumer compliance examinations of its 858 state member banks and three foreign banking organizations.4 During this period, the System also conducted 267 examinations of banks for their compliance with the Community Reinvestment Act.

The Board's supervisory responsibilities also extend to the foreign operations of U.S. banks and, under the International Banking Act, to the U.S. operations of foreign banks. Beyond these activities, the Federal Reserve System maintains continuous oversight of the banking industry as part of its effort to ensure the overall safety and soundness of the financial system.

Back to section top

Services to Financial Institutions and the Public

The Federal Reserve System plays a central role in the nation's payment systems by ensuring that enough currency and coin are in circulation to meet the public's demand. As the issuing authority for Federal Reserve notes, the Federal Reserve Board orders new currency from the Bureau of Engraving and Printing, pays for the printing and transportation of currency, and issues currency to the Reserve Banks. The Reserve Banks order new coin from the U.S. Mint to supplement inventories and distribute new and fit currency and coin through depository institutions to meet public demand. The Reserve Banks also receive deposits of currency and coin from depository institutions; identify suspect counterfeit currency, which they forward to the U.S. Secret Service; and destroy currency that is unfit for circulation. In 2010, the Reserve Banks distributed approximately $687.8 billion in currency and $6.5 billion in coin to depository institutions. The Reserve Banks also received approximately $633.9 billion in currency and $6.0 billion in coin from depository institutions, and they destroyed $120.0 billion in unfit currency. In 2010, the cost of printing and transporting currency was $622.9 million.

The Reserve Banks also play a central role in the nation's payment systems by collecting checks and providing a variety of electronic services for depository institutions. In 2010, the Banks collected approximately 7.7 billion commercial checks, with a total value of about $11.1 trillion. The Banks' automated clearinghouse (ACH) service allows depository institutions to send or receive credit transfers, such as direct payroll payments and corporate payments to vendors, and debit payment transactions, such as payments of insurance premiums, mortgages, loans, and other bills from consumer accounts. In 2010, the Reserve Banks processed approximately 11.5 billion ACH transactions, valued at about $21.4 trillion. Approximately 11 percent of the transactions were for the federal government; the rest were for commercial establishments.

The Reserve Banks' Fedwire Funds Service allows participants to use their accounts at the Reserve Banks to transfer funds to other participants. In 2010, the Reserve Banks processed approximately 125 million Fedwire funds transfers, valued at more than $608 trillion.

The Reserve Banks' National Settlement Service allows participants in private clearing arrangements to settle transactions through their Federal Reserve accounts. In 2010, approximately 19 local and national private arrangements, primarily check clearinghouse associations, used the National Settlement Service. The Reserve Banks processed more than 519,000 settlement entries for these arrangements, with a debit value of more than $14.5 trillion in 2010.

The Reserve Banks' Fedwire Securities Service provides securities services to participants, including the settlement of book-entry transfers of securities issued by the U.S. Treasury, federal government agencies, government-sponsored enterprises, and certain international organizations. In 2010, participants originated approximately 20.5 million transfers, valued at more than $325 trillion.

Back to section top

Services to the U.S. Treasury and Other Government Agencies

As fiscal agents and depositories for the federal government, the Federal Reserve Banks auction Treasury securities; process electronic and check payments for Treasury; collect funds owed to the federal government; maintain Treasury's bank account; and develop, operate, and maintain a number of automated systems to support Treasury's mission. The Reserve Banks also provide certain fiscal agency and depository services to other entities; these services are primarily related to book-entry securities. Treasury and other entities fully reimbursed the Reserve Banks for the costs of providing fiscal agency and depository services. In 2010, reimbursable expenses amounted to $456.4 million.

The Reserve Banks auction, issue, maintain, and redeem securities, as well as operate the automated systems supporting paper U.S. savings bonds and book-entry marketable Treasury securities. In 2010, the Reserve Banks conducted 301 Treasury securities auctions and processed nearly 11.5 million Treasury securities transfers. The Reserve Banks also printed and mailed more than 16 million savings bonds. The Reserve Banks continued to support Treasury's efforts to improve the quality and efficiency of its securities services.

The Reserve Banks collect and disburse funds on behalf of the federal government. In 2010, the Reserve Banks processed 1.2 billion government ACH payments and 185 million Treasury check payments. The Reserve Banks continued to support Treasury's ongoing effort to convert paper checks to electronic payments through the Go Direct initiative, and operated Pay.govLeaving the Board , an application supporting Treasury's program that allows the public to use the Internet to authorize and initiate payments to federal agencies.

The Treasury maintains operating cash accounts at the Reserve Banks. In 2010, the Reserve Banks continued to support Treasury's effort to modernize its financial management processes, with a focus on improving centralized government accounting and reporting functions. The Reserve Banks also managed several new and ongoing software development efforts in support of Treasury's objectives.

When permitted by federal statute or when required by the Secretary of the Treasury, the Reserve Banks provide fiscal agency and depository services to other domestic and international entities. Book-entry securities issuance and maintenance activities account for a significant amount of the work performed for these entities.

Back to section top

System Policy Direction and Oversight

This operational area encompasses activities by the Board of Governors in supervising Board and Reserve Bank programs.

Back to section top

1. The Community Depository Institutions Advisory Council is a new council, formed by the Board in 2010 to replace the Thrift Institutions Advisory Council. For more information, see Return to text

2. For a list of items included in the Reserve Banks' current income, refer to Table 10, Income and expenses of the Federal Reserve Banks, in the "Statistical Tables" section of the 2010 Annual Report of the Board of Governors of the Federal Reserve System,available at More detailed information on System income and the distribution of income can also be found in the Annual Report. Return to text

3. FOMC meeting minutes and policy statements are available on the Board's website at Return to text

4. The foreign banking organizations examined by the Federal Reserve are organizations that operate under section 25 or 25A of the Federal Reserve Act (Edge Act and agreement corporations) and state-chartered commercial lending companies owned or controlled by foreign banks. These institutions are typically not subject to the Community Reinvestment Act, and they typically engage in relatively few activities covered by consumer protection laws. Return to text

Last update: July 13, 2011