Commentary 
How can a bank with the power to create money out of thin air manage to lose money and become insolvent? The Federal Reserve can do it. Here is how.
The Fed is losing money at an accelerating rate. Based on generally accepted accounting principles (GAAP), the Fed soon could soon be considered insolvent.
The central bank’s unique financial position results from a history of bad decisions combined with its current attempt to correct for past mistakes. Higher interest rates are having a devastating effect on the Fed’s cash flow as well as its capital.
The Fed’s cash flow consists mainly of interest it receives from its $8.3 trillion holdings of securities and interest the Fed pays on its liabilities to banks. The Fed’s second-quarter financial report lists interest income of $46 billion from those securities. The receipts amount to an annualized interest rate of roughly a 2 percent….