Federal Reserve earned $45 billion in 2009 - highest in FED history. - Wasington Post

[JohnWxy]

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/11/AR2010011103892.html

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.

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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.

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[Skink]

1. Bonus time.

[hughee99]

2. I'm not really a "high finance" guy, could someone help me out...

I realize they made money from other sources, but specific to the US bonds... The fed buys government bonds, makes a profit, and returns that profit to the US government. So if the fed made, say, $30 billion on US bonds, and then returns that $30 billion to the US government, doesn't the US government essentially "break even" on it? Yes, compared to private bond owners, where the government pays out interest (that isn't returned) it's good, but it's not really a net profit either, is it? All you're really doing is moving this money around, but it sounds from the article (and maybe I'm misreading it) like the government is making a profit on this.

[GiveMeFreedom]

5. it is based on

fractional banking. Basically its loaning money that never existed in the first place. Vapor, Air, Puffs of Smoke, Farts all have the same intrinsic value as fractional money.

[JohnWxy]

8. The FED really isn't expected to make a profit. It's there to stabilize credit markets. Its profit

as the article said was mainly from interest paid out by the Treasury on U.S. Bonds the FED bought(in an effort to provide liquidity to the market...to help prevent a collapse of the entire banking system which would have brought business to a halt...not good!.). So the FED is returning interest paid out by the Treasury on those $1.8 Trillion in U.S. Bonds the FED holds.

So the Government saved $46 billion of interest expenses because the FED doesn't keep any profit it makes but returns it to the Treasury.

"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"

[tomm2thumbs]

3. vapor money

here, have some...
<<handing over some air>>

don't spend it all in one place now

[winyanstaz]

4. EARNED???? Don't you mean STOLE?

[Demeter]

6. This Is Most Probably a Lie

Yves Smith has been investigating, and she says they are claiming "profits" that have not been realized on the junk that they stuck into Maiden Lane III, that these profits are nothing of the kind, and that this toxic sludge will NEVER, EVER, be worth the paper it's printed on, let alone what they initially paid for it.

[Lucky Luciano]

7. I agree that it is likely distorted by mark-to-market for

toxic securities that cannot be realized - though it may be worth greater than zero. Also, they probably made money by buying USG bonds that are higher in value because of their continued buying - look at below on selling - and on any rise in Fed Fuinds rate that they control!

[TexasObserver]

9. late recommend