The losses don’t affect the Fed’s day-to-day operations and won’t require the central bank to ask for an infusion from the Treasury Department. Unlike federal agencies, the Fed doesn’t have to go to Congress hat in hand to cover operating losses. Instead, the Fed created an IOU in 2022 that it calls a “deferred asset.”

Drilling into the linked article:

If the Fed runs sustained losses, it won’t have to turn to Congress, hat in hand. Instead, it will simply create an IOU on its balance sheet called a deferred asset. When the Fed runs a surplus again in future years, it would first pay off the IOU before sending surpluses to the Treasury.

The Federal Reserve is in essence the formalized cartel of the private banks, and this IOU process is yet another way in which these banks are too big to fail: the Treasury’s money printer will never let them fail.

Even my paywall bypass browser extensions failed on this one, so for anyone else: http://archive.today/2024.01.14-042838/https://www.wsj.com/economy/central-banking/fed-posts-largest-ever-annual-operating-loss-6e249a39