FTSE 100
Dow Jones

Thursday, 4 February 2010

The most profitable bank on Wall Street

For all the vilification of Wall Street banks, one firm managed to record a bumper profit without attracting derision for its employees or owners. Indeed for this bank, 2009 was a year of record profitability and the main beneficiary will be the American tax payer, because the bank in question, the Federal Reserve Bank, booked a $45 billion profit, the best result in its 96-year history.

The Fed's earnings for the year dwarf those of the large US banks, easily topping the combined profits of Bank of America, Goldman Sachs and J.P. Morgan Chase. Much of the higher earnings came about because of the Fed's aggressive program of buying bonds, aiming to push interest rates down across the economy and thus stimulate growth.

At the end of 2009, the Fed held $1.8 trillion in U.S. government debt and mortgage-related securities. The interest income on those investments was a major source of profits, although the bank is likely to book a loss if it sells the securities to reduce the money supply.

The Fed also made money on its emergency loans to banks and other firms and on special programs to prop up lending. Although it lost $3.8 billion on loans it made to bail out Bear Sterns and AIG, it made $4.7 billion in interest from those loans.

Despite the record earnings, the CEO of the Federal Reserve, Ben Bernanke, received a modest cost-of-living pay rise for 2010. He now earns $199,700.

No comments: