Fed Returns $77 Billion in Profits to Treasury

The Federal Reserve had a pretty good year:

There was something odd in today's quarterly financial report (as of March 31) by the world's largest and most profitable hedge fund: the US Federal Reserve.

This story was funny. The Federal Reserve plans to "Twist" its balance sheet.Translating into English, the Federal Reserve plans to sell some short term Treasury debt and buy longer term Treasury debt. They will still keep the Fed Funds Rate at 0%-0.25%.What's the point? Who benefits? Duh! I'm not even going to bother with spoiler space.

We know its not Paulson, Ackman, or SAC; is it Dalio's Bridgewater? No, the world's most profitable private entity that is in business to generate profits via speculation in financial markets is, drum roll please, the Federal Reserve. Stone & McCarthy (SMRA) estimates the Fed will make around $90bn profits in 2012. Of this around $87.5bn will be remitted to the US Treasury - a new record high (quite helpful when one is trying to avoid a debt ceiling using 'extraordinary measures' though we assume this is already penciled in due to its consistency).

A key player in the financial crisis was insurance giant AIG, which sold a huge volume of credit default swaps supposedly protecting buyers of mortgage-backed securities from losses due to default. But AIG had nowhere near the capital necessary to honor these guarantees when things went bad, and much of AIG's liabilities ended up being picked up by the Fed and the Treasury. On Tuesday the U.S.

Several days ago we wrote about what we defined as the Fed's "D-Rate" - the interest rate at which the cash outflows from payments by the Fed on its Excess Reserves will surpass that cash inflows from its asset holdings, a very troubling day because as we further explained, from that point on the Fed would be "printing money just to print money." In other words, with every passing day, the Fed is getting ever closer to the point where the inflation it so very much wishes to unleash will force

Congratulations to CNBC for one of the silliest economic assertions in history. Please consider this sentence from Fed steps up release of results, says first-half income up. Its release of first and second quarter results detailed a sharp rise to $46.447 billion in its payments to the Treasury, from $40.456 billion in the first six months of 2011, reminding U.S. taxpayers the Fed has been a significant source of income. Fed a Significant Source of Income?

Annie Lowrey reports on yesterday’s conference on financial regulation implementation: