Nearly 14 years ago, Federal Reserve Chairman Ben Bernanke assured Congress that the Fed’s emergency quantitative easing policy, including the purchase of mortgage-backed securities, was temporary and would eventually be reversed.

The Fed’s significant purchase of mortgage-backed securities led to artificially low mortgage interest rates, fueled a housing bubble, and rendered housing unaffordable for many individuals.

However, these investments in mortgage-backed securities have resulted in substantial losses for the Fed, costing billions of dollars monthly and expected to persist for years. The Fed’s massive portfolio includes $2.3 trillion in mortgage-backed securities that were mainly acquired when mortgage yields were low.

Presently, the value of these securities is notably lower than the purchase price, leading to a substantial unrealized market value loss of $423 billion based on the Fed’s financial statement. Accounting for realized cash operating losses, the Fed’s actual capital is estimated to be in the negatives.

With a $423 billion unrealized loss due to higher interest rates, whereas the Fed earns lower rates on mortgage-backed securities, it costs the Fed $62 billion annually to maintain these securities. Additionally, the Fed’s losses directly impact the U.S. Treasury, imposing significant costs on taxpayers.

Despite Bernanke’s 2014 testimony that these measures were temporary, the Fed’s prolonged investment in mortgage-backed securities raises questions about the duration of this experiment. However, selling these securities would result in substantial cash losses, exacerbated by the Fed’s significant market presence.

Given the enormity of the Fed’s holdings, selling them would trigger negative market implications and political repercussions. Consequently, it appears that the Fed will retain these securities until their maturity, continuing to incur significant monthly cash losses. Ultimately, it seems the Fed will be managing these substantial, unprofitable investments for the foreseeable future.