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The Federal Reserve’s $46B Record Profit

From a strangely elated Associated Press:

Fed posts record profit of $46.1B for last year

By Jeannine Aversa, AP Economics Writer, Tuesday January 12, 2010

WASHINGTON (AP) — The Federal Reserve made a record profit of $46.1 billion last year, reflecting money made off its extraordinary efforts to rescue the country from the worst economic and financial crisis since the 1930s, the central bank announced Tuesday.

The windfall gets turned over to the Treasury Department.

It marks the biggest profit on record dating back to 1914 when the Fed was created. The previous record profit — of $34.6 billion — was registered in 2007. In 2008, the Fed reported a profit of $31.7 billion.

The Fed says the bigger profit was primarily due to increased income from the securities it held last year.

Such income went up as the Fed’s holdings of securities mushroomed.

The Fed launched several securities-buying programs last year to help revive the economy. Its goal is to drive down rates on mortgages and other consumer debt.

Under one program that ended last year, the Fed snapped up $300 billion worth of government debt. Under another program, the Fed is on track to buy $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac, and an additional $175 billion in debt issued by the mortgage giants. Those programs have boosted the value of securities held by the Fed.

The Fed faces a risk, however. The Fed could lose money if the central bank had to sell those securities and their prices were to fall. The Fed might need to sell the securities to sop up some of the unprecendented [sic] amount of money pumped into the economy during the crisis.

The Fed is funded from the interest earned on it vast portfolio of securities. It is not funded by Congress.

After covering its expenses, the Fed gives what is left over to the Treasury Department.

We’re no economist, but it’s very hard to see how this is anything beyond a ‘profit on paper.’

This “windfall” is largely based on mortgage securities. As even the article finally acknowledges, nobody really knows how much these are worth, if anything.

In any case, isn’t this just $46.1 billion dollars that has been sucked out of the US economy by this quasi governmental institution?

And, again as the article notes, whatever is left over will be given to the federal government.

So it’s a little hard to see how this is a “windfall” for anyone besides bureaucrats and the rest of the Democrat Party.

This article was posted by Steve on Tuesday, January 12th, 2010. Comments are currently closed.

12 Responses to “The Federal Reserve’s $46B Record Profit”

  1. tranquil.night says:

    Yeah, it’s awesome because the fringe left over at huffing and puffington is in a tizzy over this too. It just goes to show the level of intelligence: they’re so mad but they can’t figure out why Geithner, Obama, and Bernanke love the idea of profits so long as Goldman Sachs and the Fed are the ones profiting. So blinded by ideology the obvious just totally evades them.

  2. proreason says:

    Bullshit. Shameless propaganda.

    Governments can’t make profits. Period. They aren’t “profit-based” entities.

    This is one of the most obvious shills for big governent imaginable. It’s shameless.

    And don’t forget the reprehensibly corrupt accounting used by our decadent and criminal government. Any private business that used the “rules” government uses would be shut down immediately and the executives imprisoned.

    • CBDenver says:

      Agree that this is just an accounting gimmick. The fed balance sheet is here http://www.federalreserve.gov/Releases/H41/Current/

      Their balance sheet assets include over 908 billion in mortgage backed securities. The footnote claims
      “Guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Current face value of the securities, which is
      the remaining principal balance of the underlying mortgages. ”

      The part about Fannie, Freddie, and Ginnie is LOL funny, but the part about valuation being “the remaining principal balance of the underlying mortgages” is not. Basically their assets are over-inflated securities. If priced to market, not to fantasy, their balance sheet would be a real mess.

    • proreason says:

      As a follow-up, the accounting rules used by the government are magical stories that the politicians make-up to hide their ponzi schemes and criminal activities.

      The most notorious is the famous scheme to allow FICA taxes to be used for whatever bribes the criminals want to pay to their latest benefactors.

      But there are many others. A fun new one in the Health Scare bill is they falsely claim Medicare Savings of over $400 billion, which they then spend twice to get the laughable “cost” under 1 trillion. a) those savings will never happen, and b) you can’t spend savings twice. And by the way, the true “costs” of the bill are totally outside the accounting. They only “count” what they want to count. Sweet, huh?

      And then, of course, the “benefits” of Health Scare start in 4 years, whereas the “levies” to pay for it start immediately. Then they claim the cost is “only” 1 trillion over 10 years. That’s like you add up 10 years of your salary and subtract 6 years of expenses, and then claim that you’ve saved money.

      To call these things the actions of idiots is wrong. The actions are DELIBERATE FRAUDS to trick the citizens into thinking the government is solvent. They are CRIMES. Our elected officials are CRIMINALS. If they tried these tricks in private business, they would be prosecuted and thrown in jail. There may be no private business that has ever been as corrupt as our government. Ever.

    • mr_bill says:

      I agree, its definitely BS. The government couldn’t make a profit running a whorehouse and a horse track, how the hell would they make a profit in securities?

  3. BillK says:

    Meanwhile the idiots on the Hill will of course say “See, there’s another $46B we can add to the next ‘stimulus’ program!”

    We’ve gone so far off the rails we can’t even see the tracks anymore.

  4. retire05 says:

    Wasn’t Daniel Mudd head of Fannie in 2007? Didn’t he leave under a cloud of having followed his predecessor, Franklin Raines, for cooking the Fannie books to produce higher profit margins and therefore creating higher bonuses for himself?

  5. Liberals Demise says:


    Until then it is all Obama transparency to me!!

  6. Rip Cord says:

    If this were TRUE then we could eliminate the federal income tax! Didja ever notice that Dem-Qada is always SELLING Bovine Feces, but are never buyers of it?

  7. Chuckk says:

    The Fed must be the only government agency to every turn a profit, even if the profit is questionable. I thought profits were bad. Shouldn’t Chris and Barney be cooking up laws to prevent this in the future?

  8. wardmama4 says:

    I think We The People should start making up signs – Big Fed must be controlled and Stop the Obscene Profits of Big Fed and Put a Cap on Big Feds Golden Parachutes and COLA raises etc. to make a point.

    I know that this is all really just smoke and mirrors to convince the stupid masses that the economy is on the rise and the good times are just around the corner (how’s that 50% unemployment helping Detroit – and with it’s 21% of it’s HS grads are illiterate – and of course the obligatory weekly muslim uprising on flights to the little D, why would anyone want to fly to Detroit).

    When you count in the millions that simply have given up on finding a job (raising my hand to the roof) – the unemployment is nearing 22% nationwide – so in it’s transparent attempt to calm the masses – the Thug Administration makes up a faux profit – not realizing (as with most of the policies it has done for the past 12 months) that it is going to backfire on them – now, sooner not later.

    The people are tired of (as Judge Judy once said) having their leg pi**ed on and being told it is raining.

    The majority of America – is not Stuck on Stupid.

  9. joeblough says:

    Windfall profits tax !!!


    Public protest!

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