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$77.4 Billion: The Federal Reserve's 2011 Profit

"The Fed reported a larger profit than America's five largest banks combined, thanks to interest on its massive portfolio of Treasury debt and other securities it bought during and after the financial crisis."

By Annalyn Censky
On Twitter: @AnnCensky

This factoid appeared in MONEY Magazine earlier this year.
(Site is cnnmoney.com)

This raises some questions in my mind...

Is THIS what the central bank was created to do - to make massive profits when things go bad?

Wasn't the central bank created to AVOID financial disasters and bank runs?

If the central bank can PROFIT off America's bad economies, doesn't that create a CONFLICT OF INTEREST since the FED has so much control of how the economy functions (ie interest rates, liquidity etc)?

Or maybe I just don't get it and I must be one of those Ron Paul KOOKS.

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EMBEZZLEMENT BY THE FED

The conclusion that the main source of income for the Fed is from interest on the national debt ($77 to $100 billion annually) is poorly placed.

The major source that is hidden from congress is from the auctions of Treasury securities. All of the handling is by the FRBNY and there is NO reporting or accounting records of disbursements available to Congress or to the public. The hidden profit amounts to $4 billion DAILY. Ref. Federal Reserve Heist, www.scribd.com/doc/101937790 . Any other institute would be called an embezzler.

It appears that these hidden profits are used to fund the New World Order scheme. Ref. http://www.scribd.com/doc/115919607/FUNDING-OUR-OWN-SELF-DES...

1) Yes. 2) Yes. Will that be all Sir?

Chart to help explain how the Fed was able to eek out a small profit: All those trillion Dollar loans, guarantees, bailouts & takeovers 2012

Central Bank Follies: ☠ Central Banks Global Insanity Makes Scary Markets ☠ Submitted by Mark Twain, 05/18/2011

"To error is human. To find a bug that will completely eviscerated the whole world economy requires a computer." - Kermit the Frog's distant cousin from California

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

A central bank should not profit ONE PENNY from its actions.

Was it not originally created to PROTECT the American financial system from booms and busts?

But this is not the case now.

In fact, they CAUSE the booms and busts for their OWN ENRICHMENT.

Never mind Nixon's statement that "We are all Keynesians now" --- We are are all SLAVES now.

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

Despite the Fed trying to pump like crazy

with their balance sheet increasing by $2bn since late 2007 and the government borrowing at well over $1tn every year the money supply has stopped increasing.

The Fed is scratching it's head about what to do about it.
In just about it's last resort option from Nov 2011 it started sending cheap dollars to the ECB with cheap loans.

But even this has had no effect.

http://4.bp.blogspot.com/-7VJ0V3c593s/UIbuq5ITZ3I/AAAAAAAAAR...

"In the end, more than they wanted freedom, they wanted security. They wanted a comfortable life, and they lost it all -- security, comfort, and freedom. When ... the freedom they wished for was freedom from responsibility, then Athens ceased to be free."

The Fed had $85bn of income

from that they deducted around $4bn for "expenses" and $3.8bn for dividends to their shareholders.
The balance of $77bn "profit" was sent to the Treasury.

The Fed's balance sheet is now $2.8tn, so $85bn works out to be an average of 3% interest on the debt instruments they hold.

The Fed has been selling short dated Treasuries which are paying almost no interest (Five year note now around 0.7%) and buying long dated (30 year note around 2.8%) in what is known as Operation Twist.

The Fed will soon run out of short dated Treasuries to sell and will just buy long dated Treasuries at the rate of about $45bn per month.

The Feds balance sheet was $880bn in 2007 before the financial collapse.
QE1 & QE2 took their balance sheet up to $2.8tn.

QE3 (or QE to infinity as their is no limit or end date) is set to take the Feds balance sheet up to circa $4tn by the end of 2013.
QE3 = the Fed buying up MBS assets at the rate of $40bn per month.
MBS = Mortgage backed securities

The Fed will charge the Treasury if they book a loss on the assets on their balance sheet instead of a "profit".

If you do not believe rates of 1.7% for 10 year loans or 2.8% for 30 year government loans are sustainable, this is only a matter of time.

N.B. the historical average for 10 year US government loans are 5 or 6% (average over the last 200 years).

"In the end, more than they wanted freedom, they wanted security. They wanted a comfortable life, and they lost it all -- security, comfort, and freedom. When ... the freedom they wished for was freedom from responsibility, then Athens ceased to be free."

I'm sure ole Ben broke a terrible sweat...

..printing all that cash!

So why can't any of the Govt entities turn a profit?!

Post Office: Broke. Billions in debt. Cutting branches and employees. Slower mail delivery.

Social Security: Broke. SS ‘Lockbox’ was robbed by congress! Nothing left in it for the seniors.

Medicare: Broke. Mismanaged.

Medicaid: Broke. Mismanaged.

Fannie Mae: Broke. $4 billion taxpayer bail out. CEO fired, yet left with multimillion dollar bonus.

Freddie Mac: Broke. CEO still gets multimillion dollar salary plus bonuses.

No Child Left Behind: $54.4 billion per year. America ranks 17th in education compared to other modern countries.

Department of Energy: $26.4 billion budget. Gas prices at all time high!

Fair Housing Act: The Feds forced the Banks to issue Subprime Mortgages to minorities with bad credit, major cause of current recession. 841,073 foreclosures in 2012.

United States: Broke. $15 trillion in debt and counting. Liability per taxpayer: $1,041,469 and counting.

List of Successful Government Programs: President Obama: Obama’s net worth more than tripled in 3 years: $300,002 in 2008 to $3,670,505 in 2011! Obama wanted CHANGE. He got DOLLARS!

“The nearest thing to eternal life we will ever see on this earth, is a government program.” - Ronald Reagan

When Fascism goes to sleep, it checks under the bed for Ron Paul!

A confirmation

That the federal Reserve is not part of our Government!
If it were, they would be operating at a loss!

When Fascism goes to sleep, it checks under the bed for Ron Paul!

I'm starting to believe that,

I'm starting to believe that, w/ that kind of money flow, they look at money like blades of grass. Its about power.

Behold, I send you forth as sheep in the midst of wolves: be ye therefore wise as serpents, and harmless as doves. - Matthew 10:16

Debbie's picture

I thought they returned any "profit" back to the Treasury?

*

Debbie

They do

The Fed prints money to give banks almost interest-free loans. The banks eventually do pay the Fed back, and after the Fed has paid its electric bill, that repayment money is what gets returned to the Treasury.

Since 2008, the Fed has also been printing money to buy mortgage backed securities, and since it came into existence it has always been there to buy US treasuries from the government. The 'profit' that is being talked about in this case is how these types of things that the Fed had on its balance sheet are now 'worth' $77B more than they were a year ago.

This is propaganda to manipulate the unthinking public into believing that because the Fed's 'portfolio' went up in value, it must mean that they are shrewd financial managers. Never mind that if the mortgage backed securities that they own were marked to market, the loss would overwhelm any of the pathetic gains that their treasury or corporate paper holdings had. Smart people know that the stuff that they've brought on board would be drop in price to a fraction of what they claim its worth the day they stopped buying it.

What should I say to those

What should I say to those who defend the Fed by saying that the Fed returns 5 to 10 per cent of all of its profits to the Treasury? Is it true, or is this seemingly small amount still a huge if reduced profit, given the size of the actual profit?

It could be argued that a central bank should not profit...

...even ONE PENNY from its actions.

Was it not originally created to PROTECT the American financial system from booms and busts?

But this is not the case.

In fact, they CAUSE the booms and busts for their OWN ENRICHMENT.

Never mind Nixon's statement that "We are all Keynesians now" --- We are are all SLAVES now.

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

The Fed's business model:

1)Create desired amount of legal tender by a computer entry
2)Buy stuff with it
3)Profit

Well

They do PRINT MONEY to buy the assets, so they better turn a profit.

_________________________________

Freedom - Peace - Prosperity

Guess you're right.

Print for profits.

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

Wow!

I've been wanting to work from home for many years now because the concrete business is really slooooowing down due to the poor economy and I am just barely getting by.

Where can I get my very own "prints for profit" home business opportunity so I too can turn in a profit at the end of the year?

I promise to pay any and all taxes I am liable for!

This is great!

This sounds so easy!

Thanks for the post!

I'm excited!

" In Thee O Lord do I put my trust " ~ Psalm 31:1~

You need not break laws. You need Limited Liability.

Just open your own a bank. Pretty much, every country in the world allows folks to open banks. Take deposits. "Fractional Reserve" them. Accept loan applications for about 10 X what you Fractionally reserved. Keep your cash registers full with enough that depositors keep depositing.

Accept payment on each promise to pay (e.g.: approved loan app; line-of-credit; etc.). I left the study of all the rules up to you.

---------------------------------------------------------------------
Here is an example of how to run several banks into the abyss & ask for government bailouts (far in excess of your bank's market value). Jamie Dimon sucks $400 Billion. Other bankers suck $3.5 Trillion on Fed tit. Submitted by Mark Twain, 06/20/2012

You must budget your cash flow. There are some inherent limits to banking systems in place: $1.66 Quadrillion Cash Flow Racket Run By Monopoly Boyz! Submitted by Mark Twain, 04/08/2012

You may live beyond your means, with government approval: Big Bank Theory: $250 Trillion Tender. JPM BoA GS MS. Bang! Submitted by Mark Twain 09/25/2011

That should get you started.

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul