Fed Piles Up $66 Billion in Paper Losses as It Faces Trump Wrath

... officials play down the significance of the theoretical losses and say they won't affect the ability of what they call "a unique non-profit entity'' to carry out monetary policy or remit profits to the Treasury Department. Case in point: the Fed handed over $51.6 billion to the Treasury in the first nine months of the year.

... "A central bank with a negative net worth matters not in theory,'' former Fed Governor Kevin Warsh said in an email. "But in practice, it runs the risk of chipping away at Fed credibility, its most powerful asset.''

The unrealized losses also provide fuel to critics of the Fed's huge bond buying programs -- commonly known as quantitative easing -- and the monetary operating framework underpinning them, just as central bankers begin discussing the future of its balance sheet. The ostensible red ink also could make it politically more difficult for the Fed to resume QE if the economy turns down.

... The Fed is currently reducing its bond holdings by a maximum of $50 billion per month -- not by selling them, which could force it to recognize an actual loss -- but by opting not to reinvest some of the proceeds of securities as they mature.