Friday, September 04, 2009

Federal Reserve makes $14 billion profit on economic crisis

The Financial Times reports that the Federal Reserve has made a $14billion profit on loan programs that have provided hundreds of billions of dollars in liquidity to the financial system since the start of the crisis two years ago, according to Fed officials.

The central bank earned about $19 billion in income from charging interest and fees to financial institutions and investors that tapped the new facilities to obtain much-needed funds during the turmoil. The interest the Fed would have earned by investing the same amount in T-bills was an estimated $5 billion, leaving a $14billion gain since August 2007.

Some politicians have criticized the Fed for using billions of dollars of public funds to support the market and stricken groups such as AIG and Bear Stearns. A recent Gallup Poll found the Fed had the worst public approval rating of nine government agencies, even lower than the tax authorities.

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