Federal Reserve Earns $46.1 Billion Profit Thus Far From Bailout Efforts
INDUSTRY NEWS
January 18th, 2010
Maybe bailouts do have a silver lining! The Federal Reserve announced last week it made a record $46.1 billion as a result of gains on securities it purchased to shore up the financial system. The Fed is not in the business of making money but this was a side effect of bailouts to aid the banking industry. The profits were turned over to the Department of Treasury.
The primary goal of the Federal Reserve is taking actions that stabilize monetary systems. They can buy or sell securities, print money or adjust interest rates banks charge each other. The Fed purchased mortgage-backed securities in 2009 to keep interest rates low. These securities pay a higher rate of return than Treasury securities which helps explain the windfall profits.
This could change if the financial markets take a turn for the worse. However, Fed officials believe the investments are safe. This news should silence those concerned President Obama put too many taxpayer dollars at risk to shore up the financial sector of the economy. Of course, there are many Americans that will never admit his gamble paid off!
Besides making great returns on securities, the Fed reported $2.6 billion in profits from currency swap arrangements with central banks in 14 countries and $700 million from fees charged to banks for services provided by the Fed.
It would appear that bailouts authorized by President Obama have averted a catastrophic meltdown of our financial systems as well as paid a handsome return to taxpayers. The fact that many banks are paying back TARP funds and even GM has begun paying back some of their bailout funds indicates our new president probably made the right moves.
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BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
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