It turns out that one business that has been able to stay profitable in the midst of the largest recession since the Great Depression is central banking. Today the Fed announced that it will return $45 billion to the US Treasury, the biggest refund that the central bank has ever seen.
Signs of Success
That the Fed was able to turn this kind of profit after pumping billions of dollars into the failing banking industry demonstrates that the bailout plan has been successful to some extent. Of course, it is easier to make money with the near-unlimited funds of the Treasury backing you, but these higher than ever numbers should restore some confidence in the actions taken by Ben Bernanke and the Fed over the past year.
The bailout itself sparked huge debates, dividing the American public and raising questions about how far the government should be allowed to involve itself in supporting financial institutions. Additionally, the aggressive actions by the Fed as they attempted to drive down interest rates and stimulate economic growth earned Ben Bernanke a thorough questioning by Congress during his renomination process last month.
Banks Do Their Part
But it has also been the actions of banks that has helped the Fed to post such large profits for the past year. The larger than expected number of institutions that paid back billions of dollars in TARP funds, with interest, contributed greatly to the Fed’s success. Whatever you may think of the bonuses being paid at large financial institutions, it appears that they have put in a solid effort to make sure that the American people are being repaid.
The Fed’s 2009 profit margin is expected to be greater than those of Bank of America, JP Morgan and Goldman Sachs combined.