Fed 'Earns' Record $45B

Subject: Fed 'Earns' Record $45B Tue Jan 12, 2010 8:02 pm

The Federal Reserve's efforts to keep the economy afloat last year earned it the highest profits in its 96-year history. The Fed—which funds itself and turns its earnings over to the Treasury—made a total of $45 billion last year, dwarfing the profits of many big banks. Interest on the Fed's $1.8 trillion in government bonds and mortgage-backed securities accounted for much of the earnings.

The profits show that the Fed has largely succeeded in shielding taxpayers from the costs of shoring up the economy, although analysts warn that the Fed's unprecedented range of actions during the financial crisis have also exposed it to more risk than ever before. "They've moved up the risk-return curve, as they have more long-term assets and more things that involve credit risk," an economist tells the Washington Post.

This shows that central banking is a great business to be in, especially in a crisis. You buy assets that have a nice yield, and your cost of funds is very low. The difference is profit. - Former Fed official Vincent Reinhart

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

Fed 'Earns' Record $45B

Fed 'Earns' Record $45B

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