ederal Reserve banks are included in the financial corporate sector in the GDP accounts. The profits of the Federal Reserve banks (mostly interest receipts) are shown separately in the profits before taxes of financial corporations. After paying their expenses, the Federal Reserve banks turn the rest of their earnings over to the Treasury; these payments are reported in the GDP accounts as corporate tax payments.
Financial transactions, such as loans and purchases or sales of financial securities by Federal Reserve banks are not recorded in the GDP accounts, but are recorded in the Federal Reserve Board’s flow of funds accounts. These financial transactions are not directly counted in GDP because they involve the exchange of financial claims and liabilities rather than current income or production. Capital gains or losses related to transactions involving financial securities are also outside the scope of the GDP accounts because they represent a change in the value of an existing asset rather than income from current production. However, the holding of financial securities by Federal Reserve banks results in the receipt of interest and dividends, which are included in their net earnings. Therefore, a reduction in the receipt of interest and dividends by the Federal Reserve banks would lower their profits.
For more information on the treatment of federal financial interventions in the GDP accounts, see the FAQ: “How do federal financial interventions, such as the Emergency Economic Stabilization Act of 2008, affect the GDP accounts?”
For information on government sponsored enterprises (GSEs), please see the FAQ: “Where do GSEs, like Fannie Mae and Freddie Mac, appear in the GDP accounts?”