Elon Musk took aim at the Federal Reserve in a post on X Sunday, calling the US central bank “absurdly overstaffed.”
It marks the second time that Musk, who has headed up efforts under President Donald Trump to slash federal government spending, has targeted the central bank with the same charge. He posted a similar accusation in December.
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Musk's Department of Government Efficiency, or DOGE, has been instrumental in cutting government staff and demanding employees at many agencies submit emails accounting for their recent work.
Fed Chair Jerome Powell last month rebutted the idea that the central bank has an excess of employees.
“Overworked maybe, not overstaffed,” Powell replied in response to a question from Democratic Senator Andy Kim of New Jersey at a congressional hearing. “Everybody at the Fed works really hard. It's a place where people work very hard.”
Legal Protection
The Federal Reserve Board in Washington and its 12 regional reserve banks across the US employed roughly 24,000 people in 2023.
The law that established the central bank and governs its operations stipulates the Fed's Board of Governors “shall determine and prescribe the manner in which its obligations shall be incurred.”
“The Federal Reserve Act specifically gives the Fed authority to hire and fire its employees, and they're not part of the civil-service system,” said Scott Alvarez, a former general counsel at the Fed. “So as a legal matter, the Fed could say, ‘We have the sole authority to do hiring and firing.'”
Unlike many parts of the federal government, the US central bank doesn't receive funding through the congressional budgetary process. Its income derives from its own operations — primarily from the interest on government securities that it has acquired through open market operations.
Nonetheless, the Fed could be vulnerable at the moment to extra scrutiny over its finances.
For many years, income from the Fed's balance sheet was more than enough to cover operational expenses and resulted in a surplus that was turned over to the Treasury each year. Remittances to the Treasury peaked at $117 billion in 2015.
But interest expenses on bank reserves have ballooned in recent years as the Fed raised interest rates to combat inflation, resulting in a deficit of $116 billion in 2023. The figure, however, represents a paper loss and has no direct impact on federal deficits or debt.
The Fed budgeted $7.1 billion to cover operating expenses in 2024, 10% higher than its actual expenses in 2023, according to its 2023 annual report.
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