The Federal Reserve outearns Goldman Sachs
The Federal Reserve had a pretty good year:
Wall Street firms aren't the only banks that had a banner year. The Federal Reserve made record profits in 2009, as its unconventional efforts to prop up the economy created a windfall for the government.
The Fed will return about $45 billion to the U.S. Treasury for 2009, according to calculations by The Washington Post based on public documents. That reflects the highest earnings in the 96-year history of the central bank. The Fed, unlike most government agencies, funds itself from its own operations and returns its profits to the Treasury.
To put this more clearly, "the Fed's earnings for the year will dwarf those of the large banks, easily topping the expected profits of Bank of America, Goldman Sachs and J.P. Morgan Chase combined." The money here is mostly coming from an aggressive policy of buying bonds to lower interest rates, and given that the Federal Reserve can get money for nothing, the yield on those bonds is pretty much pure profit.
That money is going straight back to the rest of the government, which makes sense. On the other hand, I can't help but wish the Federal Reserve would take a quick lesson from Wall Street and hand out some fat bonuses, or maybe some serious raises. It wouldn't be the worst thing in the world if some of the bright young things who flood into investment banks each year thought hard about going into central banking instead -- particularly if we're really going to expand the Federal Reserve's power and make it into a much more aggressive regulator.
January 12, 2010; 12:55 PM ET
Categories: Federal Reserve
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