The interest on the government bonds that are on our balance sheets ﬂows to central banks and then back to our treasuries as part of our proﬁt. This means that, for this part of sovereign debt, the funding costs are uncoupled from the capital market.
Together, the Federal Reserve and other functional regulators work to discharge the supervisory and examination responsibility given to each agency for particular parts of a large financial firm in a way that maximizes the expertise and resources of each agency and best ensures the safety and soundness of the consolidated firm and each of its constituent parts.