Fed Earned $2.7 Billion in 1st Quarter

It pays to be in the money creation business. Remember – the Fed doesn’t ‘loan’ existing money to banks, financial institutions, etc – it creates money. So – anytime you see the word ‘loan’ associated with the Federal Reserve’s many ‘programs’ - it’s simply a deceptive way to disguise the fact that the Fed has created money and is charging interest on the money it creates.

What we’re really being told here is that the Fed made $2.7 billion dollars last quarter by simply printing money. I think we can all agree (whether or not you have a finance background) that turning paper into money (or adding dollars to electronic accounts and then charging interest on this money) is most likely a highly profitable enterprise. Also remember – the Fed is a private corporation owned by private shareholders – which means that these shareholders earned $2.7 billion dollars in only one quarter.

Now – think about this – the Fed earned $2.7 billion dollars in one quarter - which leads to some very interesting questions. If we assume that this business of printing money (and earning interest on the money you create) has been this lucrative since the inception of this system (Federal Reserve Act of 1913) – it stands to reason that the shareholders (there are few shareholders) of this institution and their heirs are extremely wealthy. In fact, some very simple math would tell you that their wealth would dwarf Gates, Buffett – not to mention every corporation on the planet. Also remember – the same shareholders who control the Fed – also control every Central Bank in the world – so the wealth created by this elite few – is immeasurable. It dwarfs the wealth of any other person or entity in our world. It’s not even close.

If we factor in the truth that these same people have the ability to increase the cost of the money they create and the ability to contract the money supply that you and I need to survive in the system – it doesn’t take much thought to conclude that their power in this world is incalculable. If none of this bothers you – it should.

If you want a nice case of insomnia tonight – think about who we’re told are the wealthiest people in the world. Gates, Buffett, old money families and corporate tycoons – all come to mind. Is this the truth? As you’ve learned – the answer is no. So – why do the wealthiest people on the planet wish to remain in the shadows? Answer this question Alice – and you’ll find out just how deep the rabbit-hole goes.

The founding fathers of our nation were wise – and understood the power (and dangers) of printing and managing a nation’s money supply. This is why our current monetary system is forbidden by the Constitution of the United States. Is this surprising to you? It really shouldn’t be – if we all stopped looking at our blackberries, talking on our cell phones, watching ‘American Idol’, etc. – and actually focused on what is really important (things like…….protecting our freedom) – we might actually read something important – like the Bible and our Constitution - every once in awhile.

The founders of the United States of America forbid anyone other than the U.S. Congress from managing our money supply (and the value of our money) for one very simple reason – if you control a nation’s money – you control a nation’s economy and commerce – thereby controlling the nation. You can't have a Republic with a ruling elite.

If you want another case of insomnia for tomorrow night – ask yourself how this monetary system could have been enacted when it is forbidden by the Constitution. The short version is - a decades long battle was lost in 1913. I'll leave the details for you to research.

The Congress shall have power to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures.

–Article 1, Section 8, U.S. Constitution

jg
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JUNE 10, 2009, 1:45 P.M. ET

Fed Earned $2.7 Billion in 1st Quarter

By BRIAN BLACKSTONE

WASHINGTON -- The U.S. Federal Reserve made almost $2.7 billion last quarter when gains and losses on its myriad lending facilities, asset holdings and loans to Bear Stearns and American International Group Inc. are tallied up, according to data released Wednesday by the Fed.
The report, which includes new details on Fed lending programs including collateral quality and concentration of loans among banks, is part of the Fed's effort to provide more details on its interventions into financial markets.

The Fed aims to release the report on a monthly basis.

The report, and other steps the Fed has taken, "significantly enhances" information the Fed is releasing "and should help the public and the Congress better judge how we are carrying out our responsibilities for stabilizing the financial system and the economy," Fed Chairman Ben Bernanke said in a statement.

According to the 20-page report, the Fed had net earnings of $1.2 billion last quarter on loan programs including overnight loans to banks and investment banks, the Term Auction Facility and Money Market Mutual Fund Liquidity Facility. It earned another $2.1 billion on the Commercial Paper Funding Facility and $4.6 billion on its portfolio of assets. In contrast, it lost a combined $5.2 billion during the first quarter on its loans to Bear Stearns and AIG, as reflecting in facilities called Maiden Lane I, Maiden Lane II and Maiden Lane III.

A senior Fed official said those Maiden Lane losses are based on mark-to-market accounting, and the Fed has been advised that if it were to hold those assets to maturity, it may not actually realize any losses.

The $2.7 billion net earnings figure doesn't include outside price services and other administrative expenses.

The report also included details of the Fed's liquidity swap lines with other central banks. As of May 27, the Fed had $101 billion in liquidity swaps outstanding with the European Central Bank (down from $291 billion on Dec. 31, 2008), $9 billion with the Swiss National Bank, $25 billion with the Bank of Japan (down from $123 billion at the end of 2008) and $13 billion with the Bank of Korea.

A total of 566 depository institutions borrowed from the Fed's discount window in the four weeks ended May 27, with the majority of borrowing done by 27 large banks with assets of more than $50 billion.

Borrowers pledged $965 billion in collateral as of May 27 against $448 billion in loans.
The report doesn't list individual banks that have borrowed from the Fed, or in what amounts. The senior Fed official said the Fed is mindful of the stigma that might be associated with being named by the Fed as a borrower, which could be interpreted as a sign of weakness.

Write to Brian Blackstone at brian.blackstone@dowjones.com