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Old 12-07-2009, 01:46 PM
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Bernanke: Fed will make profit on bailout

Federal Reserve chairman Ben Bernanke said Monday he's confident the Federal Reserve will make money on the trillions it has pumped into the economy since the start of 2008.

"I think we're in very good shape," Bernanke said, answering questions following a speech at the Economic Club of Washington. "I do believe we're going to get back all the money, and indeed we'll be showing for the taxpayers fairly significant extra income."

Bernanke was referring specifically to Fed programs -- not the Troubled Asset Relief Program (TARP). The U.S. Treasury will likely lose money on TARP, though the Obama administration is expected to announce soon that losses will be $200 billion less than initially expected.

The Fed has actually pumped far more money into the economy than Treasury did through TARP.

Its balance sheet soared to $2.2 trillion currently, from less than $900 billion before the financial crisis began in 2008.

The book on some of that lending is already closed. For example the Fed has stopped extending money for commercial paper, a form of short-term borrowing used by the nation's largest corporations. The Fed had nearly $300 billion in commercial paper on its balance sheet a year ago, but has only about $15 billion today.

The company that was the biggest recipient of help from the Fed was insurer American International Group (AIG, Fortune 500), which at one point in October 2008 owed the central bank nearly $90 billion. While the firm has yet to start paying back that money in cash, the government has taken various assets and units of the company in lieu of payment. The Fed intends to sell those assets in the future when they have a better market value. Today, the Fed has AIG loans of only $20.7 billion.

In his comments, Bernanke did not specify if the Fed will make money on the AIG transaction itself, or if losses there will be covered by other actions by the Fed during the crisis.

Much of the Fed's efforts to pump money into the economy came through the purchase of mortgage securities backed by finance firms Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), as well as the debt issued by those companies. It eventually plans to purchase $1.25 trillion of those mortgages and $175 billion of that debt. It has also purchased about $300 billion in U.S. Treasurys.

http://money.cnn.com/2009/12/07/news...eech/index.htm

Fed will make profit on bailout? Voila
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Old 12-07-2009, 01:54 PM
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When I saw the title of this thread from the home page, this is what it said.

Quote:
Bernanke: Fed will make...
So I filled in the blanks,

Quote:
Bernanke: Fed will make you all slaves to the federal reserve system
So I clicked the thread, only to see they were once again not telling the truth.


Quote:
The Fed has actually pumped far more money into the economy than Treasury did through TARP.
Yea, and printing money out of thin air causes inflation.
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Old 12-07-2009, 02:10 PM
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Well, I guess the Fed has very good contracts with some paper and ink makers. Just kidding
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Old 12-07-2009, 02:15 PM
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Yea, and printing money out of thin air causes inflation.
I think most people miss the point that inflation increases the cost of living, while their wages stagnate.

Just thought I should make that point explicit.
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