profit last year, countering concerns that the central bank has put too
much taxpayer money at risk in attempts to stabilize the financial
industry.
The Fed said it had paid the profit to the U.S. Treasury, marking an increase of
more than what it paid following 2008. The increase was largely due to
higher earnings on securities in 2009 that the Fed had purchased as
part of its unprecedented intervention in the financial system.
“The significant increase in earnings on securities
was primarily due to increased securities holdings as a result of the
Federal Reserve’s response to the severe economic downturn,” the
central bank said.
The previous record was
in 2007. But Federal Reserve officials stressed that the goal of the
central bank is stabilizing monetary policy, not earning profits. The
Fed is funded by its earnings, and profits are turned over to the
federal government.
Starting in late 2008, the Fed dramatically
increased its involvement in the financial system, purchasing large
amounts of securities from the U.S. Treasury and other entities. Among
the purchases were mortgage-backed securities backed by housing
agencies
which have helped push down mortgage rates. Mortgage-backed securities
pay a higher rate than Treasury securities, accounting for the
increased profit.
The Fed’s 2009 earnings are preliminary, and the
central bank could lose money on some of those investments if the
values of the securities fell. But Fed officials said they believe all
the assets they are holding are safe.
As part of the
on currency swap arrangements with central banks in 14 countries and
other investments in foreign currency. The Fed also earned
—
(c) 2010, Tribune Co.
Distributed by McClatchy-Tribune Information Services.
