2
Federal Reserve turns $90 billion profit
New Series 2001 one dollar bill notes pass through a printing press November 21, 2001 at the Bureau of Engraving and Printing in Washington, D.C.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
While leaders in Washington stare down the fiscal cliff, let's not forget the fiscal fact that brought us to the edge: The annual U.S. government deficit of more than a trillion dollars.
But through it all, one government-related entity has been hauling in record surpluses. New data capture the scope of profits at the U.S. Federal Reserve, estimated to be $90 billion this year.
"The last five or six years their profits have roughly tripled," says Allan Sloan, senior editor-at-large at Fortune Magazine.
According to Sloan, the Federal Reserve owes its success to its practice of buying securities with newly printed money.
"If you go out an buy $2 or $3 trillion of securities that pay interest and you don't have to pay any interest on the money used to buy the securities, you make a lot of money," says Sloan.
This is the supreme bamboozlement. If I had infinite money to print and loan out I could make this amount of money too. And who pays the interest to the fed on the US treasuries the fed buys? The US government. Where does the government get the money? The taxpayers. If the tax revenue is not enough? The Fed buys more treasuries so the government can pay the interest on the previous treasuries. And the debt increases yet again.
