The Federal Reserve is under rare public fire for how it handles its own balance sheet. Hedge fund manager Scott Bessent argues that the central bank is effectively burning $100 billion a year with no real oversight, and that the public is being kept in the dark about the scale and consequences of those losses. At a moment when inflation, interest rates and market volatility are already testing confidence, his charge goes to the core question of whether the Fed is being fully honest about the cost of its own policies.
Behind the headline number is a complicated mix of interest payments, bond holdings and accounting rules that most Americans never see. I want to unpack what Bessent is actually alleging, what the Fed’s own audited statements show, and how global standards say a central bank should behave when it is losing money on this scale.
What Scott Bessent is really accusing the Fed of hiding
Scott Bessent has put a stark figure on the table, saying the Federal Reserve is losing roughly $100 billion a year and doing so with “no accountability” and “no supervision.” In his telling, the central bank has created a self-financing machine that quietly absorbs those losses while elected officials and the public look away. He frames the issue not as a technical accounting quirk but as a democratic problem, arguing that an institution with this much power over credit, savings and asset prices should not be able to run a de facto negative-income operation of $100 without a serious public reckoning, as he has warned through Scott Bessent.
In a separate set of remarks, Bessent has tied that critique directly to the Fed’s interest-rate strategy. He has argued that the central bank must “do its part” and lower rates, suggesting that the current level is not only weighing on growth but also compounding the Fed’s own operating losses. By his account, the institution is paying high interest on reserves and other liabilities while holding a portfolio of longer term assets that yield less, a mismatch that he says is both costly and opaque. He has also described the situation as “not transparent,” pressing the point that the public cannot easily see how policy choices translate into the losses he is flagging, a concern he has raised in Jan.
What the Fed’s own numbers say about the losses
The Fed’s financial statements confirm that the central bank has been operating in the red, even if the precise annual figure differs from Bessent’s shorthand. One detailed recap of the Fed’s recent performance notes that higher policy rates have produced $79 billion in losses over 2024, as the interest the Fed pays on bank reserves and other liabilities has exceeded the income from its bond portfolio. Those accumulated losses are recorded as a “deferred asset” on the Fed’s books, a technical label that means the central bank is booking negative earnings today in the expectation that future profits will eventually offset them, as described in the $79 billion recap of the Fed’s 2024 results.
Another analysis, drawing directly on the Fed’s audited financial statements, reports that The Fed suffered operating losses of $77.6 billion in 2024, following a prior year of heavy red ink as well. Taken together, those two years produced a combined loss of $191.9 billion, underscoring that the problem is not a one-off anomaly but a sustained consequence of the rate-hiking cycle and the structure of the Fed’s balance sheet. The fact that these figures come from formal statements that have undergone an $77.6 billion audit process undercuts any claim that the losses are literally hidden, but it does not resolve the question of whether the Fed is doing enough to explain their implications to the public.
How “audited” is the Fed, really?
To understand whether Bessent is right about a lack of oversight, it helps to look at what global best practice says a central bank should do. A self evaluation of the International Monetary Fund’s code of good practices on transparency states in section 4.2 that a central bank should publicly disclose audited financial statements of its operations on a preannounced schedule. That benchmark is meant to ensure that the public can see not only the headline numbers but also the underlying risks, valuation methods and policy choices that drive them, and it explicitly centers the role of an independent audit in giving those disclosures credibility. The document refers to The Feder as the entity that should be following those standards, underscoring that even powerful monetary authorities are expected to submit to regular, transparent scrutiny.
On paper, the Federal Reserve does meet part of that test. The central bank publishes “Federal Reserve System Audited Annual Financial Statements” that cover the Board of Governors, the Reserve Banks and the LLC entities it uses for some of its market operations. Those statements are audited in accordance with applicable standards issued by the American Institute of Certified Public Accountants, and the responsibility for the audit work is delegated to the Reserve Banks and the LLC structures that hold specific assets. The Fed emphasizes that these financial statement audits are conducted under recognized professional norms, as described in its own audited materials. The gap Bessent is pointing to is not the absence of formal audits, but the distance between those technical documents and a plain language explanation of what multi year losses mean for policy and for taxpayers.
The mechanics behind the $100 billion burn rate
When Bessent talks about the Fed “burning” $100 billion a year, he is translating a complex set of cash flows into a single, provocative number. The core mechanism is straightforward. After years of large scale bond purchases, the Fed holds a massive portfolio of Treasuries and mortgage backed securities that pay fixed coupons. Once it raised short term interest rates aggressively to fight inflation, the interest it pays on bank reserves and other short term liabilities climbed above what it earns on those longer term assets. The result is a negative net interest margin that shows up as operating losses, which independent analysts have quantified in the tens of billions, including the Fed figure of $79 billion in 2024 and the The Fed tally of $77.6 billion in operating losses that same year.
From an accounting perspective, the Fed does not go bankrupt when it loses money, because it can create reserves and does not face the same capital constraints as a commercial bank. Instead, it records a deferred asset that represents future remittances it will owe the Treasury once it returns to profitability. In practice, that means the federal government is not receiving the usual flow of Fed profits that would otherwise reduce the budget deficit, and those foregone remittances can add up to something close to the $100 annual figure Bessent cites. He has reiterated that annual loss estimate in his criticism of the Federal Reserve, arguing that the institution is effectively absorbing a fiscal cost without the kind of congressional debate that would accompany a comparable line item in the budget, a point he has pressed in Here.
Is the Fed really less transparent than it looks?
So is the Fed “hiding the truth,” as Bessent suggests, or is the reality more nuanced? On one level, the central bank is doing what the IMF’s code and its own policies require, publishing audited statements for the Reserve Banks and the LLC vehicles and subjecting them to American professional standards. Anyone with the time and expertise can download those documents, see the $79 billion and $77.6 billion loss figures, and trace how they arise from the Fed’s interest rate decisions and asset holdings. That is not the behavior of an institution literally concealing its finances, and it matters that the numbers Bessent cites are themselves drawn from those public disclosures, including the Is the Fed coverage of his $100 claim.
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*This article was researched with the help of AI, with human editors creating the final content.
Grant Mercer covers market dynamics, business trends, and the economic forces driving growth across industries. His analysis connects macro movements with real-world implications for investors, entrepreneurs, and professionals. Through his work at The Daily Overview, Grant helps readers understand how markets function and where opportunities may emerge.
