Not just printing money — making it, too

That’s just showing off.

The Fed released its preliminary 2010 results on Monday and they show a hum-dinging whopper of a “profit”. From the release:

The Federal Reserve Board on Monday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $78.4 billion of their estimated 2010 net income of $80.9 billion to the U.S. Treasury. This represents a $31.0 billion increase in payments to the U.S. Treasury over 2009 ($47.4 billion of $53.4 billion of net income). The increase was due primarily to increased interest income earned on securities holdings during 2010.

These are the fruits of the Fed’s open market operation labours, which netted it $76.1 billion in income through securities transactions. Here are some examples; Hank Greenberg might want to look away now:

$7.1 billion in net income from consolidated limited liability companies (LLCs), which were created in response to the financial crisis; $2.1 billion in interest income from credit extended to American International Group, Inc.; $1.3 billion of dividends on preferred interests in AIA Aurora LLC and ALICO Holdings LLC; and $0.8 billion in interest income on loans extended under the Term Asset-Backed Securities Loan Facility (TALF) and loans to depository institutions.

Now, the Fed turning a healthy dime ain’t anything new, and this income will make but a dent in the deficit, but as you can see from this chart, 2010 was a record year:

Makes you wonder why analysts are struggling to see above-average returns from financials in 2011.

Related link:
The increasing frequency of the Fed’s POMOs – FT Alphaville

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