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(Huffington Post)   Fed makes record $88.4 billion profit. Thanks Obama   (huffingtonpost.com) divider line 88
    More: Spiffy, Federal Reserve, Treasury bond, Ending the Fed, interest rate risk, hyperinflation, Erin Burnett, remittances, Dean Baker  
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3045 clicks; posted to Politics » on 16 Mar 2013 at 12:31 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-03-16 07:27:12 AM
I can see no downside to this.. but I'm sure someone will be along soon to try.
 
2013-03-16 07:33:28 AM
Double tax cuts for the rich!
 
2013-03-16 09:02:56 AM
March 15 (Reuters) - The Federal Reserve sent a record $88.4 billion in profits to the U.S. Treasury last year, audited results showed on Friday, a big payday for the government thanks to the central bank's massive bond purchases.

The income came mostly from $80.5 billion in interest on Treasury bonds and mortage-backed securities, according to the annual financial statements audited by Deloitte.


I'm going to have to sit down and figure this out (and God knows I'm lazy), but is this saying that the Federal Reserve bough Treasury bonds, the Treasury paid interest to the Federal Reserve on those bonds, and then the Federal reserve gave the interest back to the Treasury?
 
2013-03-16 10:00:33 AM

Snarfangel: March 15 (Reuters) - The Federal Reserve sent a record $88.4 billion in profits to the U.S. Treasury last year, audited results showed on Friday, a big payday for the government thanks to the central bank's massive bond purchases.

The income came mostly from $80.5 billion in interest on Treasury bonds and mortage-backed securities, according to the annual financial statements audited by Deloitte.

I'm going to have to sit down and figure this out (and God knows I'm lazy), but is this saying that the Federal Reserve bough Treasury bonds, the Treasury paid interest to the Federal Reserve on those bonds, and then the Federal reserve gave the interest back to the Treasury?


It seems like a poorly written article. If I recall correctly - the interest was paid largely by investors.
 
2013-03-16 10:11:25 AM
jeez, obama is rapidly becoming the worst worst president of all time!
 
2013-03-16 10:33:46 AM
Oh for fark sake.  If the Fed wants to put cash into the market, it does so by buying Treasuries.  The gov't pays interest on Treasuries to whomever holds them.  The Fed then returns its profits to the Treasury.

When the Fed wants to reduce the money supply it will sell of Treasuries thereby taking cash back out of circulation.

What did people think?  The Fed raised or lowered the money supply by printing dollars, opening a window, and throwing them out on the streets?
 
2013-03-16 10:39:10 AM

wejash: Oh for fark sake.  If the Fed wants to put cash into the market, it does so by buying Treasuries.  The gov't pays interest on Treasuries to whomever holds them.  The Fed then returns its profits to the Treasury.

When the Fed wants to reduce the money supply it will sell of Treasuries thereby taking cash back out of circulation.

What did people think?  The Fed raised or lowered the money supply by printing dollars, opening a window, and throwing them out on the streets?


Damn.... and here I am with my money catching basket looking like a total chump.
 
2013-03-16 11:16:13 AM

Snarfangel: March 15 (Reuters) - The Federal Reserve sent a record $88.4 billion in profits to the U.S. Treasury last year, audited results showed on Friday, a big payday for the government thanks to the central bank's massive bond purchases.

The income came mostly from $80.5 billion in interest on Treasury bonds and mortage-backed securities, according to the annual financial statements audited by Deloitte.

I'm going to have to sit down and figure this out (and God knows I'm lazy), but is this saying that the Federal Reserve bough Treasury bonds, the Treasury paid interest to the Federal Reserve on those bonds, and then the Federal reserve gave the interest back to the Treasury?


The Fed has been buying treasuries for some kind to encourage lending.  But yes, since they are technically separate entities, the US government just made a profit on itself, which it now has to pay to itself so it can turn a profit on itself.
 
2013-03-16 11:44:34 AM
I really need to stop borrowing money from myself.

The interest payments are killing me.
 
2013-03-16 12:32:23 PM
They are printing 75 billion a month.  Who needs profits?
 
2013-03-16 12:38:20 PM

Snarfangel: March 15 (Reuters) - The Federal Reserve sent a record $88.4 billion in profits to the U.S. Treasury last year, audited results showed on Friday, a big payday for the government thanks to the central bank's massive bond purchases.

The income came mostly from $80.5 billion in interest on Treasury bonds and mortage-backed securities, according to the annual financial statements audited by Deloitte.

I'm going to have to sit down and figure this out (and God knows I'm lazy), but is this saying that the Federal Reserve bough Treasury bonds, the Treasury paid interest to the Federal Reserve on those bonds, and then the Federal reserve gave the interest back to the Treasury?


No investment safer than a mortgage backed security!
 
2013-03-16 12:49:59 PM

Amos Quito: I really need to stop borrowing money from myself.

The interest payments are killing me.


Technically one of the biggest holders of debt is Social Security (not that its IN debt, it holds debt). The SS "lockbox" has tons of money so it buys treasury bonds with that money, we then pay interest to SS for those treasury bonds.

//Now that interest rates are near negative SS isn't making as much profit as it was before.
 
2013-03-16 12:50:47 PM

Bontesla: Snarfangel: March 15 (Reuters) - The Federal Reserve sent a record $88.4 billion in profits to the U.S. Treasury last year, audited results showed on Friday, a big payday for the government thanks to the central bank's massive bond purchases.

The income came mostly from $80.5 billion in interest on Treasury bonds and mortage-backed securities, according to the annual financial statements audited by Deloitte.

I'm going to have to sit down and figure this out (and God knows I'm lazy), but is this saying that the Federal Reserve bough Treasury bonds, the Treasury paid interest to the Federal Reserve on those bonds, and then the Federal reserve gave the interest back to the Treasury?

It seems like a poorly written article. If I recall correctly - the interest was paid largely by investors.


CTRL-F "Negative interest rate"  No hits.

If I remember correctly someone was claiming that there are bonds at a negative interest rate, meaning rich people (and China) are basically paying the US government for the right to have the US government continue to borrow their money.

Alternatively, they are paying a storage fee to have their wealth protected.
 
2013-03-16 12:54:04 PM

MFAWG: No investment safer than a mortgage backed security!


there's the negative spin we've been waiting for.
 
2013-03-16 12:54:37 PM
Well that's nice for the Fed and all, but try comparing that to Latvia!
 
2013-03-16 12:55:18 PM

TheBigJerk: If I remember correctly someone was claiming that there are bonds at a negative interest rate, meaning rich people (and China) are basically paying the US government for the right to have the US government continue to borrow their money.


There's no such thing as negative interest rates because you'd have to be retarded to do that.  I assume you're referring to when the rate of inflation is greater than interest rates you deposit under and so you have a net loss that's not exactly a real loss.
 
2013-03-16 12:58:27 PM

MindStalker: Amos Quito: I really need to stop borrowing money from myself.

The interest payments are killing me.

Technically one of the biggest holders of debt is Social Security (not that its IN debt, it holds debt). The SS "lockbox" has tons of money so it buys treasury bonds with that money, we then pay interest to SS for those treasury bonds.

//Now that interest rates are near negative SS isn't making as much profit as it was before.



It's all just a fancy way of saying "taxes".
 
2013-03-16 01:00:13 PM

Doktor_Zhivago: TheBigJerk: If I remember correctly someone was claiming that there are bonds at a negative interest rate, meaning rich people (and China) are basically paying the US government for the right to have the US government continue to borrow their money.

There's no such thing as negative interest rates because you'd have to be retarded to do that.  I assume you're referring to when the rate of inflation is greater than interest rates you deposit under and so you have a net loss that's not exactly a real loss.



It isn't?
 
2013-03-16 01:06:11 PM

MindStalker: Amos Quito: I really need to stop borrowing money from myself.

The interest payments are killing me.

Technically one of the biggest holders of debt is Social Security (not that its IN debt, it holds debt). The SS "lockbox" has tons of money so it buys treasury bonds with that money, we then pay interest to SS for those treasury bonds.

//Now that interest rates are near negative SS isn't making as much profit as it was before.


You're right, but in the technical jargon, nominal interest rates are low but positive and inflation-adjusted returns are negative. Nominal rates can never be negative. Inflation-adjusted returns below inflation are actually common, and it's a reflection of how "safe" an investment is.
 
2013-03-16 01:07:45 PM
I'm an Internet Investment Advisor:  Treasury bills are discount instruments, which means that you buy a $1,000 treasury bill at $978.00 then interest is the difference between the amount you paid and the redemtion price over the period of the bill - usually 90 days.

The Fed is buying and selling treasury instruments all the time to affect the money supply and thereby feed or slow down spending, which affects inflation and job growth.  This is separate from the treasury instruments being issued by the Department of the Treasury to supply the money for the continuing operations of the givernment.

Interest rate demand affects the value of debt instruments, including treasury bills.  If the Fed purchases a $1,000 treasury bill at $999, then at redemption it has earned $1.  The net of all earnings - if there are any - are annually turned over to the Treasury.
 
2013-03-16 01:08:36 PM

Doktor_Zhivago: TheBigJerk: If I remember correctly someone was claiming that there are bonds at a negative interest rate, meaning rich people (and China) are basically paying the US government for the right to have the US government continue to borrow their money.

There's no such thing as negative interest rates because you'd have to be retarded to do that.  I assume you're referring to when the rate of inflation is greater than interest rates you deposit under and so you have a net loss that's not exactly a real loss.


Correct, the interest rate on treasury bonds is ridiculously low (think 1.5% ish for the 10-year T-Note). inflation therefore, is greater than the interest (its at what, 2 or 3% right now?).
So investors in the T-note are losing cash money by putting it there.
 
2013-03-16 01:09:12 PM
The Fed "prints" money out of thin air. Loans it to banks who repay it with interest. You should just shoot yourself in the head if you can't make a profit with that business model.
 
2013-03-16 01:10:04 PM
OMG! The government is making money! We need to lower taxes to stop this outrage!!

OMG! The government is running a deficit! That proves how irresponsible they are and can't be trusted with our money, so we need to lower taxes so there's less of it for them to mismanage!

OMG! The budget is exactly balanced! Look over there, the President got a blow job! We need impeach the President, and lower taxes to stop this outrage!
 
2013-03-16 01:19:56 PM

badhatharry: The Fed "prints" money out of thin air. Loans it to banks who repay it with interest. You should just shoot yourself in the head if you can't make a profit with that business model.


heyy, whadda ya know? fiat currency works!
 
2013-03-16 01:28:11 PM

FlashHarry: badhatharry: The Fed "prints" money out of thin air. Loans it to banks who repay it with interest. You should just shoot yourself in the head if you can't make a profit with that business model.

heyy, whadda ya know? fiat currency works!


Also, being a Central Banker is nice work.

If you can get it.
 
2013-03-16 01:30:00 PM

Amos Quito: It's all just a fancy way of saying "taxes".


Except it has nothing to do with taxes. WTF are you talking about?

Amos Quito: It isn't?


For accounting/tax purposes I guess it would be.  But you still have more pieces of money than you started with, it's just worth slightly less.
 
2013-03-16 01:36:18 PM
The socialist masters who taught Fartbongo socialism did a terrible job.
 
2013-03-16 01:44:33 PM

Alphax: I can see no downside to this.. but I'm sure someone will be along soon to try.


1.  It happened under circumstances in which Obama could possibly be given credit.
2.  Soshalizm
 
2013-03-16 01:44:42 PM
So...can they afford to do white house tours again?
 
2013-03-16 01:47:34 PM

jehovahs witness protection: So...can they afford to do white house tours again?


They still do private tours. You gotta know someone.
 
2013-03-16 01:48:14 PM

heavymetal: The socialist masters who taught Fartbongo socialism did a terrible job.


You said socialism twice.
 
2013-03-16 01:50:56 PM
I can see how somebody who doesn't understand the mechanics of money supply manipulation or what the word "profit" means would write this article.
 
2013-03-16 01:56:09 PM

jehovahs witness protection: So...can they afford to do white house tours again?


is this the new Benghazi?
 
2013-03-16 01:56:20 PM
the fed is a privately owned bank.


i848.photobucket.com
 
2013-03-16 01:59:14 PM

Raharu: jehovahs witness protection: So...can they afford to do white house tours again?

is this the new Benghazi?


i.imgur.com
 
2013-03-16 02:13:44 PM
GOP response: Government making a profit!?!? That's not how a government should work. Let's give back the money to the taxpayers.

/Ya can't win with the GOP.
//That's exactly what GW Bush did with his pointless Bush tax cuts
///We had a budget surplus from Clinton that Bush squandered with his tax cuts
////Then drove the budget into the ground with two unfunded wars
 
2013-03-16 02:20:01 PM

StopLurkListen: MindStalker: Amos Quito: I really need to stop borrowing money from myself.

The interest payments are killing me.

Technically one of the biggest holders of debt is Social Security (not that its IN debt, it holds debt). The SS "lockbox" has tons of money so it buys treasury bonds with that money, we then pay interest to SS for those treasury bonds.

//Now that interest rates are near negative SS isn't making as much profit as it was before.

You're right, but in the technical jargon, nominal interest rates are low but positive and inflation-adjusted returns are negative. Nominal rates can never be negative. Inflation-adjusted returns below inflation are actually common, and it's a reflection of how "safe" an investment is.


I said "near negative" I meant near zero, actually Japan had negative rates for a little while, we've thought about them, but they are kinda strange and dumb.
 
2013-03-16 02:23:39 PM

Raharu: Benghazi


Don't say that word. It conjures the disturbed one.
 
2013-03-16 02:29:17 PM

catpuncher: I can see how somebody who doesn't understand the mechanics of money supply manipulation or what the word "profit" means would write this article.


We call them liberals.
 
2013-03-16 02:29:56 PM

Phil Moskowitz: Raharu: Benghazi

Don't say that word. It conjures the disturbed one.



You have to say it three times in one post.

Benghazijuice

Benghazijuice....

Benghazijuice!!!
 
2013-03-16 02:51:16 PM

Doktor_Zhivago: TheBigJerk: If I remember correctly someone was claiming that there are bonds at a negative interest rate, meaning rich people (and China) are basically paying the US government for the right to have the US government continue to borrow their money.

There's no such thing as negative interest rates because you'd have to be retarded to do that.  I assume you're referring to when the rate of inflation is greater than interest rates you deposit under and so you have a net loss that's not exactly a real loss.


It's happened.  Last year, 10-year TIPS were sold at auction with a yield of -0.637%, and 5-year TIPS with negative yields were sold at several Treasury auctions

 http://www.bloomberg.com/news/2012-07-19/treasury-sells-15-billion- of- tips-at-record-low-negative-yield.html

The Treasury does not sell T-bills at auction with a negative nominal rate, but they may subsequently trade on the secondary market at negative yields.

http://www.bloomberg.com/news/2012-02-01/negative-treasury-bill-auct io n-yields-would-avoid-grab-a-thon-crt-says.html

Other nations have recently sold treasury bills at negative rates.

http://online.wsj.com/article/SB1000142405270230334340457751660219692 7 274.html
 
2013-03-16 02:55:15 PM
So what? They still have record liabilities on their balance sheet.
We just need 100 more years of these 'record profits' to pay them off.
 
2013-03-16 03:02:24 PM
Parthenogenetic: knowledge

The more you know.jpg

Those articles were actually quite informative.  What are you doing wasting that on the politics tab?
 
2013-03-16 03:47:20 PM
http://en.wikipedia.org/wiki/The_Communist_Manifesto#II._Proletarians _ and_Communists

Plank #5 - Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.

Close enough.
 
2013-03-16 04:01:37 PM
This is why the whole "OMG AUDIT THE FED" crowd always sounded ridiculous: we do audit it on a regular basis, and it usually turns a goddamn profit. When the economy is slow, it buys up financial instruments to inject cash into the financial system. When the economy is growing at a rapid pace, it sells financial instruments back to pull cash out of the financial system.

When your method of fixing the economy happens to match "buy low, sell high", it's very hard to lose money.
 
2013-03-16 04:03:10 PM

Alphax: I can see no downside to this.. but I'm sure someone will be along soon to try.


Then you're being willfully blind.

If you don't see the Federal Reserve's recent tactics as desperate measures for desperate times then you're fooling yourself.

I don't disagree with these measures as being better than the alternative, but if you think that the Federal Reserve making a paltry remittance of 88 billion a year on a rapidly growing (trillion a year) 3 trillion dollar debt is a good thing ... you may be a moran.

The downside of this is ... a: it's a symptom of a badly stressed financial system and b: when interest rates return to more typical (and healthy) levels the assets being held by the Fed will rapidly lose value and this revenue stream will reverse ... substantially. This miniscule ( hard to regard 88B as miniscule I know, but we're talkin' serious coin here, think T not B) revenue could rapidly change to substantial outflows on fairly small changes in interest rates, complicating the Fed's exit strategy.

That is if they ever exit.

Don't get me wrong, as I said above I agree that the Fed is between a rock and a hard place and that while QE isn't an optimum strategy for running an economy, the alternative ( depression and implosion - thanks Republicans! ) makes it a necessary evil.

Just don't be waving this beggarly 88 Billion dollar return on a 3 Trillion dollar liability in my face and proclaiming that all is well.

/loves me some volatility though ... it's good to be a trader in uncertain times
 
2013-03-16 04:03:52 PM

Alphax: I can see no downside to this.. but I'm sure someone will be along soon to try.


In Fark vernacular...

1.  You're really broke
2.  You loan yourself alot of money
3.  You pay yourself alot of interest
4.  Profits!

We're just taking money out one pocket and putting in the other and not counting the pocket we took it out of.  Usual government accounting.
 
2013-03-16 04:04:40 PM
Imagine if it weren't 0-0.25% interest to borrow from them.
 
2013-03-16 04:07:29 PM

jigger: http://en.wikipedia.org/wiki/The_Communist_Manifesto#II._Proletarians _ and_Communists

Plank #5 - Centralisation of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.

Close enough.


Do you know what exclusive monopoly is? According to your criteria, George Washington, Alexander Hamilton, and James Madison were all communists because they supported a REAL national bank, not the weird hybrid that is the Federal Reserve System.
 
2013-03-16 04:22:07 PM

Ghastly: wejash: Oh for fark sake.  If the Fed wants to put cash into the market, it does so by buying Treasuries.  The gov't pays interest on Treasuries to whomever holds them.  The Fed then returns its profits to the Treasury.

When the Fed wants to reduce the money supply it will sell of Treasuries thereby taking cash back out of circulation.

What did people think?  The Fed raised or lowered the money supply by printing dollars, opening a window, and throwing them out on the streets?

Damn.... and here I am with my money catching basket looking like a total chump.


Silly guy!  Everyone knows that Obummy only throws cell phones, health insurance policies, and food stamps!
 
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