Federal Reserve Hands over $46.1 Billion to Treasury

Federal Reserve Press Release: The Federal Reserve Board on Tuesday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $46.1 billion of their estimated 2009 net income of $52.1 billion to the U.S. Treasury. This represents a $14.4 billion increase over the 2008 results ($31.7 billion of $35.5 billion of net income). The increase was primarily due to increased earnings on securities holdings during 2009.

66 words comprise their opening paragraph. Of these, 5 are the usual Federal Reserve non-committal babble:
Preliminary
Unaudited
Indicating
Approximately
Estimated

Closing paragraph of the Press Release: The preliminary results include valuation adjustments through September 30 for loans and consolidated LLCs. The final results, which will be presented in the Reserve Banks' annual financial reports and the Board of Governors' Annual Report, will reflect valuation adjustments through December 31.

The Federal Reserve learned from their pals on Wall Street regarding valuation adjustments (courtesy of FASB and “mark to model” a.k.a. wink and a nod accounting for dummies). The most succinct definition of “valuation adjustments” is as follows:



The media is euphoric as evidenced in their headlines:
“U.S. Fed paid record $46.1 billion to Treasury”
“Fed says it paid $46.1 billion to U.S. Treasury”
“Record Profit for U.S. Central Bank”
“Fed makes record windfall off economic revival program, sends $46.1 billion to Treasury”
“Fed posts record earnings from fighting financial crisis”

Grandpa is a wet blanket on the media. Before the local media convinces everyone that all is good in the hood; a realistic evaluation recap is in order.

$2.2 trillion Federal Reserve Balance Sheet end of 2009 (approximate)
$46.1 billion preliminary, unaudited, indicating, approximately estimated profit to Treasury

Make cocoa, gather the kids for Grandpa’s math problem du jour.

$46.1 billion divided by $2.2 trillion equals 0.02 or 2%. WOW!!!

The Federal Reserve balloons their balance sheet to $2.2 trillion of “assets” (many according to Ben need to be kept secret) and yields we the taxpayer 2%.

What will Ben be capable of in 2010?