Federal Reserve earned $45 billion in 2009

[hank scorpio]

Unconventional efforts to prop up economy created windfall for government
By Neil Irwin

updated 9:25 p.m. MT, Mon., Jan. 11, 2010

Wall Street firms aren't the only banks that had a banner year. The Federal Reserve made record profits in 2009, as its unconventional efforts to prop up the economy created a windfall for the government.

The Fed will return about $45 billion to the U.S. Treasury for 2009, according to calculations by The Washington Post based on public documents. That reflects the highest earnings in the 96-year history of the central bank. The Fed, unlike most government agencies, funds itself from its own operations and returns its profits to the Treasury.

The numbers are good news for the federal budget and a sign that the Fed has been successful, at least so far, in protecting taxpayers as it intervenes in the economy — though there remains a risk of significant losses in the future if the Fed sells some of its investments or loses money on its stakes in bailed-out firms.

This turn of events comes as the banks that benefited from the Fed's actions are under the microscope: Major banks are expected to announce massive earnings and employee bonuses starting at the end of this week, and anger in Washington is at such a high boil that the Obama administration is likely to propose a fee on financial firms to recoup the cost of their bailout, officials confirmed Monday.

As it happens, the Fed's earnings for the year will dwarf those of the large banks, easily topping the expected profits of Bank of America, Goldman Sachs and J.P. Morgan Chase combined.

Much of the higher earnings came about because of the Fed's aggressive program of buying bonds, aiming to push interest rates down across the economy and thus stimulate growth. By the end of 2009, the Fed owned $1.8 trillion in U.S. government debt and mortgage-related securities, up from $497 billion a year earlier. The interest income on those investments was a major source of Fed profits — though that income comes with risks, as the central bank could lose money if it later sells those securities to reduce the money supply.

Emergency loans
The Fed also made money on its emergency loans to banks and other firms and on special programs to prop up lending, such as one that supports credit cards, auto loans, and other consumer and business lending. Those programs impose interest and fees on participants, with the aim of ensuring that the Fed does not lose money.

And while the central bank in its most recent financial report had recorded a $3.8 billion decline in the value of loans it made in bailing out the investment bank Bear Stearns and the insurer American International Group, the Fed also logged $4.7 billion in interest payments from those loans. Further losses — or gains — on the two bailouts are possible as time goes by. The Fed also charges fees for operating the plumbing of the financial system, such as clearing checks and electronic payments between banks.

From its revenue, the Fed deducts operating expenses, such as employee salaries, then returns almost all of the earnings that remain to the Treasury. The largest previous refund to the Treasury was $34.6 billion, in 2007.

"This shows that central banking is a great business to be in, especially in a crisis," said Vincent Reinhart, a resident scholar at the American Enterprise Institute and a former Fed official. "You buy assets that have a nice yield, and your cost of funds is very low. The difference is profit."

The Fed plans to release its estimate of 2009 earnings Tuesday. The Post's calculation is based on combining data through September from the Fed's monthly balance sheet report with more recent data from the Treasury's daily budget statement.

Fed officials do not make policy with an eye toward maximizing profits. They are charged by law with managing the nation's money supply to keep employment high and prices stable, and earnings fluctuate depending on a wide range of factors as they pursue that goal. In the crisis, the central bank's policy has been to create money and use it to buy a wide variety of assets, which in turn pay interest.

Exotic investments
In effect, the unprecedented range of actions taken to address the crisis has made the Fed's balance sheet more like that of a private bank. A firm such as Bank of America takes money from depositors, whom it pays little or nothing in interest, and lends it out at significantly higher rates. The Fed, similarly, takes money that banks keep on deposit, at a rate of 0.25 percent, and lends it to the U.S. government by buying Treasury securities and, lately, to home buyers and other private borrowers though more exotic investments.

While that resulted in higher earnings in 2009, it exposes the Fed to more risks down the road. "They've moved up the risk-return curve, as they have more long-term assets and more things that involve credit risk," said Diane Swonk, chief economist at Mesirow Financial.

If the price of Treasury bonds or mortgage-related securities issued by Fannie Mae and Freddie Mac were to fall in the years ahead, and Fed leaders decided they need to drain money from the financial system by selling off some of their portfolio, the central bank would lose money. "If they do enough asset sales and rates go high enough, that could eat into future profits pretty substantially," said Michael Feroli, an economist at J.P. Morgan Chase.

Even as the Fed comes to resemble private banks in terms of its balance sheet and its earnings power, there remains one big difference. The CEO of the Federal Reserve, Chairman Ben S. Bernanke, received only a modest cost-of-living raise for 2010, despite the record earnings: He now makes $199,700, with no bonus at all.
http://www.msnbc.msn.com/id/34816272/ns ... gton_post/

[dbackjon]

Very interesting...

[danefan]

Spin coming in 5.....4.....3.....2.....1

[AZGrizFan]

While that resulted in higher earnings in 2009, it exposes the Fed to more risks down the road. "They've moved up the risk-return curve, as they have more long-term assets and more things that involve credit risk," said Diane Swonk, chief economist at Mesirow Financial.

If the price of Treasury bonds or mortgage-related securities issued by Fannie Mae and Freddie Mac were to fall in the years ahead, and Fed leaders decided they need to drain money from the financial system by selling off some of their portfolio, the central bank would lose money. "If they do enough asset sales and rates go high enough, that could eat into future profits pretty substantially," said Michael Feroli, an economist at J.P. Morgan Chase.

I read this article online this morning. THIS was the paragraph that stood out to me.

[Wedgebuster]

They print the money, what risk could there possibly be.

[blueballs]

While that resulted in higher earnings in 2009, it exposes the Fed to more risks down the road. "They've moved up the risk-return curve, as they have more long-term assets and more things that involve credit risk," said Diane Swonk, chief economist at Mesirow Financial.

If the price of Treasury bonds or mortgage-related securities issued by Fannie Mae and Freddie Mac were to fall in the years ahead, and Fed leaders decided they need to drain money from the financial system by selling off some of their portfolio, the central bank would lose money. "If they do enough asset sales and rates go high enough, that could eat into future profits pretty substantially," said Michael Feroli, an economist at J.P. Morgan Chase.

I read this article online this morning. THIS was the paragraph that stood out to me.

...and well it should because inflation and the higher rates that accompany it are inevitable if the government keeps funding its unprecedented spending through the sale of debt, yet the economy will stagnate even further if taxes are raised on the entities that produce jobs. Quite the quandry our nanny state has produced, eh?

[CitadelGrad]

The Fed doesn't print money.

[AZGrizFan]

I read this article online this morning. THIS was the paragraph that stood out to me.

...and well it should because inflation and the higher rates that accompany it are inevitable if the government keeps funding its unprecedented spending through the sale of debt, yet the economy will stagnate even further if taxes are raised on the entities that produce jobs. Quite the quandry our nanny state has produced, eh?

When this thing turns, they sure as hell better HOPE it turns slow because if it doesn't they are not going to be able to get money out of the system fast enough. Stand by for Carter-esque inflation numbers.

Fuckin' idiots.

[Chizzang]

The Fed doesn't print money.

They do control how much is printed...
So No they don't have the engraving machine
but Yes - they are the only customer for the Bureau of engraving and tell them how much to print

Semantics

[CitadelGrad]

The Fed doesn't print money.

They do control how much is printed...
So No they don't have the engraving machine
but Yes - they are the only customer for the Bureau of engraving and tell them how much to print

Semantics

Well, no. I worked for the Fed for a short time in its Treasury Relations Department. Money supply is determined by the Fed and a number of other players, primarily Treasury. Monetary policy development and implementation is a little more complicated than you might think.

[Chizzang]

They do control how much is printed...
So No they don't have the engraving machine
but Yes - they are the only customer for the Bureau of engraving and tell them how much to print

Semantics

Well, no. I worked for the Fed for a short time in its Treasury Relations Department. Money supply is determined by the Fed and a number of other players, primarily Treasury. Monetary policy development and implementation is a little more complicated than you might think.

Yeah, had a girlfriend that worked at the Federal Reserve in Boston
Very little of what goes on inside the building can be discussed openly

The average American would REVOLT if the details about this private organization "The Federal Reserve" were published openly

[AZGrizFan]

Well, no. I worked for the Fed for a short time in its Treasury Relations Department. Money supply is determined by the Fed and a number of other players, primarily Treasury. Monetary policy development and implementation is a little more complicated than you might think.

Yeah, had a girlfriend that worked at the Federal Reserve in Boston
Very little of what goes on inside the building can be discussed openly

The average American would REVOLT if the details about this private organization "The Federal Reserve" were published openly

The "average American" would revolt if the details of just about ANY government-related agency were published openly. Why should The Fed be any different?

[CitadelGrad]

Actually, most of what goes on inside the Fed on a day-to-day basis is pretty mundane. Stories about it would bore most people to death.

[Chizzang]

Yeah, had a girlfriend that worked at the Federal Reserve in Boston
Very little of what goes on inside the building can be discussed openly

The average American would REVOLT if the details about this private organization "The Federal Reserve" were published openly

The "average American" would revolt if the details of just about ANY government-related agency were published openly. Why should The Fed be any different?

Because it functions under the disguise as a regulated federal entity - when in reality it is a group of private individuals who are only interested in themselves

The FED creates money from nothing (literally) and loans it back to us through banks...
And then has the balls to charge interest on that currency.
Then in one stunningly bizarre slap in the face buys our Government debt (which it created) with money printed on a printing press by the bureau of printing that it runs and charges U.S. taxpayers interest.

Under any other spotlight: this is fraud - straight up...

Then if you very carefully explained to America that teh FED is actually:
Rothschild Bank of London
Warburg Bank of Hamburg
Rothschild Bank of Berlin
Lehman Brothers of New York
Lazard Brothers of Paris
Kuhn Loeb Bank of New York
Israel Moses Seif Banks of Italy
Goldman, Sachs of New York
Warburg Bank of Amsterdam
and Satans own Chase Manhattan Bank of New York

they might get angry... The FED's books are not open to the public. Congress has yet to audit it.

[AZGrizFan]

wouldn't want to kill the golden goose.

[Ivytalk]

$45 billion profit? Hey, gaive my boy Ben Bernanke a bonus! No wonder he wanted his job back!

[Chizzang]

wouldn't want to kill the golden goose.

By law and according to the Congressional record we can buy back the FED for the original investment of the FED's 300 shareholders, which is $450 million - so If each taxpayer paid $25 - we could buy back the FED and all the profit would flow into the U.S. Treasury instead of the present system where all the profits flow into the above listed banks...

Because of the "FED cycle" I mention above - much of your taxes go to the shareholders of the FED and their banks...

Please Note: The very same people who enacted the FED started the IRS make sense now...?

Of course you know all this right..
you're in the "banking business"

[AZGrizFan]

wouldn't want to kill the golden goose.

By law and according to the Congressional record we can buy back the FED for the original investment of the FED's 300 shareholders, which is $450 million - so If each taxpayer paid $25 - we could buy back the FED and all the profit would flow into the U.S. Treasury instead of the present system where all the profits flow into the above listed banks...

Because of the "FED cycle" I mention above - much of your taxes go to the shareholders of the FED and their banks...

Please Note: The very same people who enacted the FED started the IRS make sense now...?

Of course you know all this right..
you're in the "banking business"

Interesting. According to MSNBC:

From its revenue, the Fed deducts operating expenses, such as employee salaries, then returns almost all of the earnings that remain to the Treasury. The largest previous refund to the Treasury was $34.6 billion, in 2007.

[Chizzang]

By law and according to the Congressional record we can buy back the FED for the original investment of the FED's 300 shareholders, which is $450 million - so If each taxpayer paid $25 - we could buy back the FED and all the profit would flow into the U.S. Treasury instead of the present system where all the profits flow into the above listed banks...

Because of the "FED cycle" I mention above - much of your taxes go to the shareholders of the FED and their banks...

Please Note: The very same people who enacted the FED started the IRS make sense now...?

Of course you know all this right..
you're in the "banking business"

Interesting. According to MSNBC:

From its revenue, the Fed deducts operating expenses, such as employee salaries, then returns almost all of the earnings that remain to the Treasury. The largest previous refund to the Treasury was $34.6 billion, in 2007.

Of course...
The FED is un-audited - it can give 34 billion back and say: That's all the money we owe you - and nobody could prove it otherwise...

I want a deal where I keep 100% of my paycheck and at the end of the year I decide how much I owe the federal government - with no audit

The FED is a private entity with no auditors
You know it stinks - I know it stinks

There's a lot more to it as well... but everybody will think I'm a kook

[CitadelGrad]

Chizz, have you ever seen Jesse Ventura's "Conspiracy Theory"? Last night's Bilderberger show was one for the ages.

[Chizzang]

You'll like this:
If the media is unbiased...
why haven't they discussed the FED in complete detail

In July, 1968, the House Banking Subcommittee reported that Rockefeller, through Chase Manhattan Bank, controlled 5.9% of the stock in CBS.

Furthermore, the bank had gained interlocking directorates with ABC... and that's illegal but what can you do

In 1974, Congress issued a report stating that the Chase Manhattan Bank's stake in CBS rose to 14.1% and NBC to 14.5% through RCA one of the parent companies of NBC... today that figure is even higher

The same report said that the Chase Manhattan Bank held stock in 28 broadcasting firms.

Three months later the Chase Manhattan Bank obtained an additional 6.7% of ABC and today the percentage is likely much greater.

It only requires 5% ownership to significantly influence the media

Chase Bank is only one of 14 banks of the FED
It is believed other FED owners have similar holdings in the media...
To control the media, FED bankers could simply call in their loans

call me crazy... but I think I'm on to something here

[Chizzang]

Chizz, have you ever seen Jesse Ventura's "Conspiracy Theory"? Last night's Bilderberger show was one for the ages.

I don't watch TV

[JMU DJ]

[Grizalltheway]

Well, no. I worked for the Fed for a short time in its Treasury Relations Department. Money supply is determined by the Fed and a number of other players, primarily Treasury. Monetary policy development and implementation is a little more complicated than you might think.

Yeah, had a girlfriend that worked at the Federal Reserve in Boston
Very little of what goes on inside the building can be discussed openly

The average American would REVOLT if the details about this private organization "The Federal Reserve" were published openly

The first (and only) time I was in DC, we walked by the Fed building and saw approx. 4-5 people gathered to protest it. I found it sad and amusing at the same time, hell, even a protest against new water regulations in a Phoenix suburb will draw 15-20.

[Chizzang]

Dude I get it... Nobody cares - or - That sounds crazy
But do some research and tell me what part of this below is not 100% accurate

1)
The FED creates money from nothing (literally) and loans it back to us through banks...
And then has the balls to charge interest on that currency.
Then in one stunningly bizarre slap in the face buys our Government debt (which it created) with money printed on a printing press by the bureau of printing that it runs and charges U.S. taxpayers interest.


take your time...