>In fact, the Reserve Banks are required by law to transfer net earnings to the U.S. Treasury, after providing for all necessary expenses of the Reserve Banks, legally required dividend payments, and maintaining a limited balance in a surplus fund.
Going purely off memory here, I recall audits implying this may not actually be happening as legally required. It was back when Ron Paul was making a big deal about it though, I can't remember the specifics so I'm bringing it up to invite discussion.
The Fed is cutting its balance sheet and thus losing money [1]. (When the Fed wants to lower rates it buys bonds, thus raising their price. That creates accounting profits. When it wants to prop rates up it sells bonds; that depresses their price leading to accounting losses.)
The Fed isn’t pocketing change owed to the Treasury. It hasn’t properly owed anything on account of having shrunk its balance sheet by trillions of dollars [2].
If it's paying dividends, then it has de facto owners. Also, are there explicit constraints on "limited" balances -- eg fraction of money supply or fraction of GDP?
> If it's paying dividends, then it has de facto owners
No, it means the FRBs have legal shareholders. (The Fed per se doesn't pay dividends.) The Treasury pays interest, that doesn't mean it's owned by bondholders.
We could easily re-write statute so the Fed doesn't pay dividends (it would become interest on reserves), they're an anachronism from the days when the Fed had to compete to induce membership. But that wouldn't do anything practical and it also wouldn't satisfy the conspiracy theorists, so it's not really in anyone's interest to bother with.
> are there explicit constraints on "limited" balances
No, though it's maintained at an amount equal to banks' paid-in capital [1]. Broadly speaking, it's another anachronism.
Going purely off memory here, I recall audits implying this may not actually be happening as legally required. It was back when Ron Paul was making a big deal about it though, I can't remember the specifics so I'm bringing it up to invite discussion.