Federal Reserve Still 'Earned' $82 Billion in 2010

After Paying $79 Billion to the U.S. Government, the Federal Reserve Still 'Earned' $82 Billion in 2010

Good to know someone is profiteering from the misery of the American people.

March 22, 2011

AP – The Federal Reserve is paying a record $79.3 billion to the U.S. government after the central bank earned a record $81.7 billion last year from its massive holdings of securities, which were purchased to help stabilize the financial system and pull the economy out of the recession.

A portion of those earnings go toward funding the Fed, which receives no appropriations from Congress. Any money left over is turned over to the Treasury Department.

The Fed says its payment to the Treasury Department for 2010 is 67 percent higher than $47.4 billion it paid in 2009, the previous record.

Fed Earnings Jump 50 Percent in 2010 to a Record $80.9 Billion

January 10, 2011

Reuters - The Federal Reserve reported Monday its earnings jumped by more than 50 percent in 2010 to a record $80.9 billion on its massive holdings of securities, and it is turning the bulk of it over to the U.S. Treasury Department.

The $78.4 billion that the Fed is remitting to Treasury is also a record and is $31 billion more than a year earlier. In 2009 the Fed had net income of $53.4 billion.

The Fed's portfolio has ballooned to $2.16 trillion, roughly triple its size before the financial crisis, as it purchased securities including U.S. government debt and mortgage-linked bonds in a move to drive down borrowing costs and stimulate the economy.

"The increase was due primarily to increased interest income earned on securities holdings during 2010," the U.S. central bank said in releasing preliminary unaudited results.

Audited results will be issued in the spring and may show some changes, Fed officials indicated.

After driving overnight interest rates close to zero percent in December 2008, the Fed bought $1.7 trillion of longer-term Treasury and mortgage-related bonds as a supplement to its pledge to keep overnight rates near zero for a long time.

It followed that up late last year with a new $600 billion bond-buying program — again intended to spur growth by pumping liquidity into the economy. That program ends at mid-year.

The Fed turns over profits to the Treasury annually and has never posted a loss. But the central bank took a number of extraordinary actions during and after the 2007-2009 financial crisis that critics say may have left it with some poor-quality holdings.

Doubts on All Sides

Critics fault the Fed on several scores, with some claiming its actions have sown the seeds for a potential flare-up in inflation and others saying it has put the central bank at risk of destabilizing losses when it sells down its holdings.

If credit losses were to pile up, those criticisms could mount.

In addition, some foreign governments have charged that the Fed's easy money policies could weaken the dollar and spark a round of competitive currency devaluations.

Fed officials who briefed reporters said asset sales would be part of a so-called "exit strategy" from loose monetary policy, but only once the economy was on a sound footing. That means sales of the securities may be some way down the road, they added.

A Fed official said that if the central bank had to make sales and take some losses, it could always scale back the amount it remits to the Treasury. But there is no mechanism in place for it to get past remittances returned by the Treasury.

In testimony to Congress on Friday, Fed Chairman Ben Bernanke gave no sign the Fed was ready start scaling back its bond purchase program. Nor did the Fed chief give any hints about further buying beyond the June deadline for the $600 billion program.

The Fed said its 2010 income included $76.2 billion in income on securities bought through open market operations, including Treasury and mortgage-linked debt, $7.1 billion from limited liability companies created in response to the financial crisis, $2.1 billion in interest income from credit extended to American International Group and $1.3 billion of dividends on preferred interests in AIA Aurora and ALICO Holdings.

The U.S. Total Debt

DollarDaze - The Federal Reserve's publications, Flow of Funds Accounts of the United States (also known as the Z.1 Releases) contain a great amount of data regarding money-flows between various sectors. Missing from this data set is the portion of debt owed by the federal government to the Federal Reserve. To retrieve that data, one must subtract the Gross Federal Debt held by the Public from Gross National Debt published by the St. Louis Federal Reserve. This data should be added to the Federal Government Debt figures in table D.3 of the Z.1 Release to account for the complete national debt.

U.S. Treasury Interest Expense on the Debt Outstanding

Available Historical Data Fiscal Year End
2010	$413,954,825,362.17
2009	$383,071,060,815.42
2008	$451,154,049,950.63
2007	$429,977,998,108.20
2006	$405,872,109,315.83
2005	$352,350,252,507.90
2004	$321,566,323,971.29
2003	$318,148,529,151.51
2002	$332,536,958,599.42
2001	$359,507,635,242.41
2000	$361,997,734,302.36

If 45% of the interest on U.S. debt goes to the Federal Reserve, then U.S. taxpayers paid the Federal Reserve $186.3 billion in 2010. So even though the Fed is remitting $78.4 billion to the U.S. Treasury, they took $107.4 from U.S. taxpayers for the privilege of printing money out of thin air and then loaning it the the U.S. government with interest.

Flashback: Federal Reserve Makes $14 Billion Profit Off Financial Crisis So Far

August 30, 2009

Financial Times - The Federal Reserve has made a $14 billion profit on loan programmes that have provided hundreds of billions of dollars in liquidity to the financial system since the start of the crisis two years ago, according to Fed officials.

The internal estimate is based on the difference between the fees and interest on the lending facilities and the interest the Fed would have earned had it invested the funds in three-month Treasury bills.

The central bank earned about $19 billion in income from charging interest and fees to financial institutions and investors that tapped the new facilities to obtain much-needed funds during the turmoil. The interest the Fed would have earned by investing the same amount in T-bills was an estimated $5 billion, leaving a $14 billion gain since August 2007.

The Fed assessment underlines the possibility that other central banks could make a profit on their crisis-fighting measures – at least before adjusting for the risk they assumed...

The Fed declined to comment.

Critics have warned the central bank might lose money on its vast efforts to avoid financial collapse and ease financing conditions for the economy as a whole.

But the internal estimates suggest that the Fed might well make a cash profit on the crisis. They show that the fees earned on the loans were high enough to more than cover defaults to date – leaving a sizeable cushion against future losses on these loans and other parts of the Fed portfolio.

Some politicians have criticised the Fed for using billions of dollars of public funds to support the market and stricken groups such as AIG and Bear Stearns. The Fed’s balance sheet has ballooned from $800 billion in 2007 to about $2,000 billion. A recent Gallup Poll found the Fed had the worst public approval rating of nine government agencies, even lower than the tax authorities.

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