Fed News Friday: Fed Makes $8.4 Trillion in 2010
July 29th, 2011
The Federal Reserve, as some of you may know by now, is a giant bank that dictates what the nation’s monetary policy is supposed to be, at least in theory. In reality, it’s job is to pump money into the economy without any government oversight whatsoever, and loan money to banks for microscopic interest rates. Thankfully, the Fed’s days of operating in secrecy are, slowly, ending. We’ve written about the trillions in emergency loans the Fed made during the financial meltdown of 2008, but as it turns out, the Fed has another secret up its sleeve: its $8 trillion profits from 2010.
As it turns out, the Federal Reserve was able to use Treasury bonds and notes, which it purchased as collateral in exchange for a cash infusion, and then turned around and sold them at auctions held by the Federal Reserve Bank of New York, probably the most powerful branch of the bank, for a massive profit. The best part about this deal for the Federal Reserve is that they don’t have to report the sales in their books, so such transactions can remain hidden from auditors.
Despite these massive profits coming from re-selling Treasury bonds, rather than selling them back to the Treasury to keep the money flow constant as they’re supposed to, they still insist on buying up the government’s debt under the scare tactic of defaults, which means they can’t make as much money as they have in the past. So there you have it, the Federal Reserve isn’t so much interested in keeping the country’s currency stable, but rather making sure their shareholders make huge profits re-selling Treasury bonds.
