Something surprising emerged in the latest Daily Treasury Statement report showing the sources and uses of operating cash of the US Treasury: the line item for Federal Reserve Earnings exploded to $19.3 billion on December 28, doubling the amount of cash the Fed had remitted to the Treasury for all of 2015.

    

This record, unprecedented one-day payment is shown in the chart below:

    

And just like that the Fed, also known as the printer of US currency, gave the Treasury a one time record bonus of $19 billion.

But wait, isn’t direct funding of the Treasury against US policy: after all, hasn’t Bernanke been on the record countless times repeating that the Fed does not monetize the US deficit?

What is going on here.

For the answer, go back to the $1.1 trillion spending deal which the “bipartisan” Congress fought so hard to get, and specifically the Highway Bill, which as a reminder would be funded with surplus funds from the Federal Reserve and part of the annual dividend banks get for owning shares of Fed regional banks.

As Bloomberg reported previously, the Fed’s surplus capital comes from the 12 reserve banks. “The highway bill would allow for a one-time draw of $19 billion from the surplus funds, which totaled $29.3 billion as of Nov. 25. If the surplus account goes above $10 billion, that capital would be swept to the government.”

The US banking system, which is therefore indirectly funding the US highway bill, was not happy:

“This proposal is misguided and undermines a key agreement that has underpinned the U.S. banking system for a century,” ABA President and Chief Executive Officer Rob Nichols said in a statement. “Banks shouldn’t be used like an E-Z Pass to pay for highways.”

Still, the reality is that after this one-time bonus of $19 billion, it will take a long time before the Fed has to pony up a comparable amount:

The banking industry has vigorously fought a cut in the dividend payout to avoid becoming a future source for government funding and potentially paving the way for a tax on banks. Decreasing the payout to 1.5 percent was estimated to generate about $17 billion over 10 years for the highway trust fund. The payout totaled less than $350 million apiece last year for JPMorgan, Bank of America, Citigroup and Wells Fargo & Co.

According to others such as Stone McCarthy, the direct remittance from the Fed to the Treasury “serves as a reminder of poor fiscal policy, and an attack against the Fed’s independence.”

What Fed independence?

Actually, what today’s “bonus” really serves, is a test of the direct monetary financing, aka “helicopter money”, policy which we have been warning is coming, and which the Fed will have no choice but to unleash once the current experiment with hiking rates in a time of global economic recession ends with a bang.

For now, however, any time you see workers filling potholes during your commute over the next 6 months, remember to thank Santa Yellen: a big part of the funds to fill those pothole was magically created by her pressing CTRL+P.