Posted on 03/23/2011 11:45:48 AM PDT by Libloather
Federal Reserve reports record profit
By Peter Schroeder - 03/22/11 12:12 PM ET
The Federal Reserve turned a record $81.7 billion profit in 2010, up 53 percent from 2009, the central bank reported Tuesday.
The vast majority of the Fed's profit — $79.3 billion — will be turned over to the Treasury Department, with the rest being paid out to member banks in dividends.
A substantial chunk of that profit came from increased interest income from the $1 trillion in mortgage-backed securities the Fed purchased during the financial crisis to help stabilize the housing market. The Fed made $24.4 billion more in interest on those holdings in 2010. The central bank also made $3.5 billion in interest from its increased holdings in Treasury bonds, as it buys up Treasury debt in an effort to boost private lending.
While the Fed is still reaping profits from its intervention into the financial system during the crisis, it is beginning to wind down other areas where it had stepped in. Loans given to insurance giant American International Group, Inc. (AIG) declined slightly in 2010 to $20.6 billion, from $21.3 billion in 2009. As a result, the Fed made roughly $1 billion less in interest on those loans.
In addition, the Fed nearly halved its investment in the Term Asset-Backed Securities Loan Facility, which shrank to $24.9 billion from $48.2 billion in 2009. That program, created by the Fed, was designed to boost credit lending by offering loans to back the issuance of securities filled with various consumer loans, like auto loans and student loans. The Fed stopped issuing new loans under the facility on March 31, 2010. The Fed reported Tuesday that its investment in the program shrank mainly due to early repayments from borrowers.
The combined annual financial statements for the Federal Reserve Bank system revealed that it had increased its asset holdings by $193 billion in 2010, reaching a total of $2.428 trillion.
The balance-sheet boost was driven in large part by the Fed's second effort at quantitative easing, which has the Fed buying up hundreds of billions of dollars in Treasury bonds in an effort to boost private lending.
The bond-buying program, dubbed "QE2," is evident on the central bank's balance sheet. The Fed's holdings in Treasury securities increased nearly $261 billion in 2010, to a total of $1.06 trillion. The Fed expects to buy roughly $600 billion in Treasury bonds under QE2, which is due to conclude at the end of June.
Paging Ron Paul.
They paid a trillon dollars for morgage backed securities and they’ve made about 160 billon in interest payments. Seems they have a ways to go before they can claim a “profit”.
So, let’s see!
Made $24.4 bil from buying $1 Trillion in junk mortgages, that is probably worth 20% of face value;
Made $3.5 Bil in Treasury bonds, as the treasury took $3.5 bil out of the left pocket, and placed it in the Fed’s right pocket;
and made the balance from TARP, even though the balance of their investment is so far underwater, it will never recover.
Such good news!
Time for all the crooks in this administration to throw aa party. The islands of the South Pacific are nice this time of year. Maybe Moochelle could bring her 500 close friends.
It is called taking advantage of bad accounting rules. They made money on the interest, but the value of the assets remains the same even though they could never be liquidated. Can’t wait to see how much they lose the year they have to expense the “loss on investments” line.
What kind of salaries do these money makers collect - say, the President of the New York Federal Reserve Bank?
Here’s how it really works:
“How much money did you make?”
“As much as we needed.”
The ‘mark to what we wish the market would pay’ accounting, as opposed to ‘mark to what it really sells for market’ accounting.
And haven’t they fixed it so that the losses show up on the Treasury balance sheets?
I am not an acountant but if you count AGI, GM , Chrysler , Fannie and Freddie how do figure you can show a profit?
Zero. Guess who is actually on the hook for those losses.
No, I believe assets are stated at cost until there is a gain or loss that is realized. Depreciation is only used for assets with a “useful life”. Please correct me if I am wrong. I went to B-school 8 years ago, but accounting was not my concentration. I merely skated through the classes and haven’t used much of it since.
Those companies were put on the national debt. The Federal Reserve is a seperate entity, though you really can’t tell them apart these days. Notice I said the debt and not the deficit. Since they were one time expenditures, they don’t count towrad the annual budget deficit. That is how the politicians can go out and spend a trillion on stimulus and comprehensive legislation then claim they cut the “budget deficit” It is all a shell game and we are falling on the losing end.
I don’t.
I think it is all flim-flam to obfuscate the public.
I don’t believe a word the FED says.
I actually believe that the TBTF banks and the USA are insolvent. Bankrupt. There is NO WAY there will ever be enough TAXES to pay all of the DEBT that the FED and the Government have created. Totally unsustainable.
Never.
Oh, in general you are right, and that is how most businesses are run.
But not the banks of today. This issue was very hot in 2008. The FSAB, I am not sure of that acronym, it is a ruling board that decides the rules that banks can run under. It is THEY who decided that what I wrote is OK. And I think it applies ONLY to the mortgage backed securities.
It was a pretty big deal at the time, specially when those MBS were selling pennies on the dollar. It allows banks to look well funded, when they are not.
It is frankly, criminal. Enron accounting is now allowed for the banks, essentially.
What do you think their cost of funds is exactly?
They only bought guaranteed MBS. They're mostly trading above par.
Made $3.5 Bil in Treasury bonds, as the treasury took $3.5 bil out of the left pocket, and placed it in the Fed’s right pocket;
This article is poorly written. They made $3.5 billion more from Treasuries than last year. I can't remember what last years number was.
and made the balance from TARP
TARP was the Treasury, not the Fed.
Has that even been disclosed?
No.
“Fuzzy Math”........
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