> If the Fed sells mortgage securities that pay low rates at a time when prevailing rates are much higher, it will incur big financial losses that reduce the funds the central bank returns to the Treasury.

Why does this reduce the amount of funds to the treasury? The losses are on the Feds balance sheet. My understanding is that the Treasury is not involved here, but the article hints at them being affected. Is it implying that treasury yields will rocket higher???

> In that scenario, expect officials to face tough questions from Capitol Hill to explain why they've lost billions of dollars on behalf of the American people.

If the Fed takes a loss, doesn't this mean that base money supply increases? Sure it will be drawing liquidity out of the system, but in the long run, it will leave more money in the system compared to where they started with QE.