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Sunday, February 20, 2011

Money in The Bank

There has been much criticism of the US government's actions in response to the "financial crisis" of 2008.  What seems to get less attention is that some of these actions worked as advertised and some even made money.


This post talks about how the emergency lending programs undertaken by the Federal Reserve between August 2007 and December 2009 have thus far produced a profit of $13 billion.  By law, the Fed must remit all profits to the US Treasury, meaning these profits directly reduce the federal budget deficit:


"The programs generated widespread worries about the Fed losing money, which would become politically difficult to deal with and could potentially compromise the Fed’s independence. Officials were confident they wouldn’t lose any money, and so far, they’ve been borne out by events. What’s more, government budget projections expect the Fed to return a significant amount of money to the Treasury Department for years to come."


Maybe a few people in Washington actually know what they are doing.