Federal Reserve turns $90 billion profit
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.
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