What the Fed really does (and it ain't pretty)

The Federal Reserve Paid the Federal Government $46 Billion in 2009. The FED Seeks Control, Not Profits

This report is from Fortune. It says that the Federal Reserve System made $51 billion in 2009, and it returned over $46 billion to the government.

The Federal Reserve System is not about making money at the expense of the government. It is about using a government-granted monopoly over money to regulate the economy to the benefit of a handful of large banks. This has always been its primary function.

The banking system is a cartel. The Federal Reserve System is the cartel's protector and enforcer.

The Fed, in a statement on Tuesday, said its members returned $46 billion of that sum to taxpayers. The central bank is an independent arm of the government and its member banks are required to return all profits to the Treasury, after certain deductions.


Those deductions account for the $6 billion difference between the two figures. Federal Reserve banks paid the private banks that control them $1.4 billion in dividends in 2009, while shoring up their own capital by $4.6 billion.

Who owns the FED? Member banks. How much money did the FED make in profit? About $1.4billion. That's not bad on $51 billion of income. It's about 2.7%. But it is a far cry from the standard criticism from anti-FED critics that the FED makes huge profits by creating money out of nothing.
For 2.7%, why does anyone care who owns the FED?

I have heard these anti-FED criticisms for years. The FED is deservedly criticized, but not on this issue: profits.

The concern over a peripheral issue deflects serious criticism, namely, its control over the monetary base. It creates the economy's boom-bust cycle. It never gets blamed for this by academic economists or the mainstream media.

The news release on what the FED paid to the Treasury is the first that I can remember. It got a lot of coverage.

My guess: the FED is trying to blunt criticism. It is getting hit from Congress because of Ron Paul's bill to audit the FED. Meanwhile, the House Oversight Committee has subpoenaed the New York Federal Reserve Bank to provide documents. The issue? The NY FED's oversight of the funding of AIG by the Treasury. This is more heat than the FED has ever experienced in its history. Wright Patman, the Texas populist Congressman, used to pillory the FED when he was chairman of the House Banking Committee a generation ago, but no one paid any attention. A lot of people are paying attention now.

A special shout out to Gary North who made this op-ed possible...