In Aussie during the 90's collapse, the stocks that increased in value the greatest: BANKS!The Swiss government made in excess of 30% lending money to UBS now the FED has made money.
Fed makes $14bn profit on loans provided during financial turmoil
By Francesco Guerrera in New York and Krishna Guha in,Washington
Published: August 31 2009 03:00 | Last updated: August 31 2009 03:00
The Federal Reserve has made a $14bn (£8.6bn) profit on loan programmes that 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 internal estimate is based on the difference between the fees and interest on the lending facilities and the interest the Fed would have earned had it invested the funds in three-month Treasury bills.
The central bank earned about $19bn 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 $5bn, leaving a $14bn gain since August 2007.
The Fed assessment underlines the possibility that other central banks could make a profit on their crisis-fighting measures - at least before adjusting for the risk they assumed.
The calculation, which has neither been audited, published nor risk-adjusted, only deals with its liquidity facilities.
Those include discount window and Term Auction Facility loans to banks, currency swaps with other central banks, purchases of commercial paper and financing for investors in asset-backed securities.
The figure is not a complete picture of Fed finances as it excludes its company-specific bail-outs and purchases of long-term assets.
The central bank is still exposed to the risk of substantial losses on its Maiden Lane portfolios - pools of assets financed as part of the bail-outs of Bear Stearns and AIG.
And the estimates do not include unrealised gains or losses on the Fed's portfolio of mortgage-backed securities and Treasuries purchased as part of its $1,750bn asset purchase programme that provides an additional stimulus to the economy.
The central bank earns interest on these securities as it does on its loans. But it could face losses if it has to sell them when interest rates are higher than when it purchased them.
The Fed declined to comment.
Some politicians have criticised the Fed for using billions of dollars of public funds to support the market and stricken groups such as AIG and Bear. The Fed's balance sheet has ballooned from $800bn in 2007 to about $2,000bn.
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