Fed makes windfall off economic revival programs

[Bugs]

The US Federal Reserve made a record $46.1 billion in earnings last year!

It's kind of shocking, I know, but it isn't really a surprise. All the money, by the way, was turned over to the US Treasury.

The Fed launched several securities-buying programs last year to help lift the economy out of recession. Its goal is to drive down rates on mortgages and other consumer debt.

Under one program that ended last year, the Fed snapped up $300 billion in government debt. Under another program, the Fed is on track to buy a total of $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac by the end of March. It also will wrap up purchases of $175 billion in debt issued by the mortgage giants at that time. Those programs have boosted the value of securities held by the Fed.

The Fed faces a risk, however. It could lose money if it had to sell those securities after their prices had fallen. The Fed might need to sell the securities to sop up some of the money it pumped into the economy during the crisis.

[....]

Besides the income from its securities, the Fed said it earned $5.5 billion from holdings related to the takeover of investment firm Bear Stearns and insurance company American International Group. The Fed also earned $2.9 billion from loans extended to banks, investment houses and others.

http://finance.yahoo.com/news/Fed-posts-record-profit-of-apf-231123775.html?x=0&sec=topStories&pos=1&asset=&ccode=

It just shows you the scale of the enterprise -- and the extent to which the Fed has become involved in running the economy.

[Pliny]

The US Federal Reserve made a record $46.1 billion in earnings last year!

It's kind of shocking, I know, but it isn't really a surprise. All the money, by the way, was turned over to the US Treasury.

It just shows you the scale of the enterprise -- and the extent to which the Fed has become involved in running the economy.

...and they are about to extend their tentacles even further.

[Jack Weber]

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[Yesterday]

The Fed launched several securities-buying programs last year to help lift the economy out of recession. Its goal is to drive down rates on mortgages and other consumer debt.

Under one program that ended last year, the Fed snapped up $300 billion in government debt. Under another program, the Fed is on track to buy a total of $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac by the end of March. It also will wrap up purchases of $175 billion in debt issued by the mortgage giants at that time. Those programs have boosted the value of securities held by the Fed.

The Fed faces a risk, however. It could lose money if it had to sell those securities after their prices had fallen. The Fed might need to sell the securities to sop up some of the money it pumped into the economy during the crisis.

[....]

Besides the income from its securities, the Fed said it earned $5.5 billion from holdings related to the takeover of investment firm Bear Stearns and insurance company American International Group. The Fed also earned $2.9 billion from loans extended to banks, investment houses and others.

http://news.ca.msn.com/top-stories/cbc-article.aspx?cp-documentid=25486564

So here we have some totals of US debt....sitting around 1.7 trillion dollars. This would be why everyone has been looking for inflation but what I understand so far is that most of that, the 1.2 trillion that went to Fannie and Freddie likely has gone overseas to deal with the mortgage debt fraud that was perpetrated against countries that bought in on the CDOs and other instruments created from this false mortgage boom. This could explain why this 1.2 trillion hasn't showed up to save the economy like everyone expected it too.

I find it kind of funny myself to hear them refer to profits of 46.1 billion on that bad debt. I wonder how much profit it would of been if the debt had of been good? The part where they show concern over whether or not the FED would have to sell low....no one will buy the bad debt anyway. Interesting that the profit has been turned over to the treasury too. That is a process of cancellation in my opinion, a needed bad because the currency in circulation has to be reduced regardless of the bad economic situation they are in. Whether this is happening because they are going to introduce a new international currency in which case the US dollar in circulation would have to contract severely or because they are trying to asset back the US dollar to keep as an international currency in which case again, the contraction needs to happen. Couple either one of these scenarios with the amount of US dollars that are being appropriated from international fraud and canceled upon return. This contraction is no surprise. Here comes the double dip....it shouldn't be a surprise.

In recent months, the U.S. economy appears to have been lurching toward a double-dip recession in the eyes of many analysts.

And such a scenario would spell trouble for Canada's largest trading partner.

In the U.S., slowing gross domestic product growth, stubbornly high unemployment and a sagging real estate sector have all combined to act as a millstone on recovery.

RBC Economics has tagged U.S. consumer spending to decline over 2009 by 1.2 per cent while the forecaster expects the unemployment rate to decline by only half-a-percentage point in the fourth quarter of 2010 compared to the same period one year earlier.

"The U.S. economy lost momentum during the summer months, causing the Fed to contemplate the prospects for further easing," said Michael Gregory, senior economist at BMO Economics.

More pump priming

Of course, with an interest rate basically at zero, the U.S. Federal Reserve has been eyeballing more exotic instruments, such as buying back more toxic debt assets from chartered banks, to help the overall economy.

In addition, U.S. President Barack Obama just announced a $50 billion US stimulus spending package in a bid to generate more private sector economic activity, heading into the Christmas quarter.

[maple_leafs182]

So here we have some totals of US debt....sitting around 1.7 trillion dollars. This would be why everyone has been looking for inflation but what I understand so far is that most of that, the 1.2 trillion that went to Fannie and Freddie likely has gone overseas to deal with the mortgage debt fraud that was perpetrated against countries that bought in on the CDOs and other instruments created from this false mortgage boom. This could explain why this 1.2 trillion hasn't showed up to save the economy like everyone expected it too.

The US debt is sitting around 13.5 trillion, 1.4 trillion this year alone, 400 billion this year on interest.

Bernake isn't worried about inflation, he is worried about deflation. All the bad debt, the defaults, they have shrunk the overall money supply. Bernake is trying to flood the market with new debt and new money all together to fight deflation.

Deflation is what caused the Great Depression, Bernake doesn't want a repeat of that.

[Yesterday]

The US debt is sitting around 13.5 trillion, 1.4 trillion this year alone, 400 billion this year on interest.

Bernake isn't worried about inflation, he is worried about deflation. All the bad debt, the defaults, they have shrunk the overall money supply. Bernake is trying to flood the market with new debt and new money all together to fight deflation.

Deflation is what caused the Great Depression, Bernake doesn't want a repeat of that.

Hi Maple, congrats on going to university!!! In this post I was just looking at one small part of the debt, commenting on the discrepancy in regards to Bernake mentioning fears earlier of inflation. No inflation worries here...like you say, the concern is deflation this time(like last time in the 90s) and it could be worse than the nineties due to the sluggish growth of M2. Once again bailing out the banks with enough currency to sink a ship with no positive effect on overall velocity. Just like the last time it seems, all that currency is going over seas and it is up to the consumer and its level of M2 here in the US to save the economy. What a joke. I wonder how hiding the M1 velocity as per an article printed in the US awhile ago is going to help them fudge the reality of things to the regular people ( consumers/M2) to get them, us, spending again....?

M2 velocity link...

http://www.marketoracle.co.uk/Article16759.html

Edited September 15, 2010 by Yesterday

[RNG]

The US is seriously screwed. They are owned by China right now. It is only because they are the biggest buyer of Chinese exports that China doesn't pull the plug on all the bonds they hold. WalMart rules. But as the rest of the second world, if I may coin a phrase, like India and Brazil become more dominant, and as Europe recovers, China will be in a position to destroy the US. That, ladies and gentlemen, is a problem for us Canadians.

[msj]

The US is seriously screwed. They are owned by China right now. It is only because they are the biggest buyer of Chinese exports that China doesn't pull the plug on all the bonds they hold. WalMart rules. But as the rest of the second world, if I may coin a phrase, like India and Brazil become more dominant, and as Europe recovers, China will be in a position to destroy the US. That, ladies and gentlemen, is a problem for us Canadians.

China is also screwed - they depend on the US to buy their junk. So much so that they lend the US money to do it.

Think about that for a while.

[maple_leafs182]

The U.S. is screwed for many reason and it is all thanks to the Federal Reserve.