The Federal Reserve is out with its year-end tally of net income Tuesday, and the central bank says it expects to return $76.9 billion to the U.S. Treasury. While that may seem like a windfall for Uncle Sam, a large portion of the figure amounts to taking money out of one pocket and putting it in another: interest payments on U.S. government bonds account for a sizable chunk of the income.
The Fed, which is bound to return residual earnings of each of its district banks after certain costs, derived 2011 net income of $78.9 billion, chiefly from $83.6 billion in interest income on securities acquired through open market operations. Those securities include bonds and mortgage-backed securities tied to government-sponsored enterprises, primarily Fannie Mae and Freddie Mac, interest paid on U.S. Treasury securities were the biggest factor as a result of the central bank’s massive government bond purchases through quantitative easing.
In his first-quarter letter to investors of Greenlight Capital, David Einhorn lashed out at regulators. He claimed that the market is "fractured and possibly in the process of breaking completely." Q1 2021 hedge fund letters, conferences and more Einhorn claimed that many market participants and policymakers have effectively succeeded in "defunding the regulators." He pointed Read More
Net income returned to the Treasury is actually down somewhat in 2011 from a record $79.3 billion in 2010, partially due to the repayment of crisis-era loans by American International Group that had been generating interest.
|ValueWalk Premium Subscription Includes: