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Today's Bureau of Economic Analysis report on economic growth and corporate profits suggests the Federal Reserve – after nearly two years of financial rescues – is turning into a pretty profitable business. (See table 12.)
The Commerce Department report says the Fed earned money at a $46 billion annual rate during the second quarter – meaning that at the second quarter's pace that's how much the central bank would earn in a year. That was up 48% from a year ago, not bad when you're sitting on junky loans from American International Group Inc. and Bear Stearns. There's good reason why it would post strong profits. The Fed can borrow money for next to nothing, and earns income on a wide range of programs – from mortgage backed securities purchases to commercial paper loans to emergency loans to banks.
Because the Commerce Department publishes data at seasonally adjusted annual rates, they aren't directly comparable with the Fed's own accounts. The Fed's latest reports show it earned $16.4 billion through the first six months of the year. (See table 29.) The Commerce Department's report suggests the profits pace picked up in the second quarter after a slow first quarter. In all, the Fed earned $35.5 billion in 2008 and $38.7 billion the year before.
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The current Fed running the show is NO different than Madoff. Think about it, are today’s fiscal and monetary policies any different than a ponzee scheme? Please read the last August 27th piece: http://psychologyofthecall.blogspot.com/
Most of the money the Fed earns, by far most of the money, is returned to Treasury. The more money the Fed makes, the more money earns the tax payer……..or should we say the less money loses the tax payer, since the government keeps running deficits.
In any case, this little detail was left out of the article, but it puts things in perspective.
IT IS THE RATE OF EARNING PROFITS AND IT IS QUITE OPTIMISTIC ISAY because the policies have started yielding fruits . jon has in fact pointed the facts that days of loss making are over and when it rises it rises in geomatric progression so to touch profits in trillions are not far off.
Jon, you are a marvelous spin master! let me see: the fed prints $1.75 trillion, buys mortgages and treasuries, earns some interest on it that more than offsets the loss on a few trillion of asset writedowns and it earns $48 billion. i would say that had the fed kept on its books the $1.75 trillion, it would have earned about that much.
Ricky Ricardo has something to say http://www.youtube.com/watch?v=Wa0Iepo27Ws
Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal's Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com. Read more Economics coverage.
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