Federal Reserve Is Making All Sorts Of Money For The Treasury

Bloomberg is reporting that the Federal Reserve will probably transfer record earnings exceeding $70 billion into the US Treasury. The income is coming from assets that include mortgage-backed securities, says the Congressional Budget Office.

The Federal Reserve’s actions to stabilize the financial markets are likely to significantly increase the amount of its remittances over the next few years,” the CBO said in a report released today. It was prepared at the request of Senator Judd Gregg of New Hampshire, the senior Republican on the Senate Budget Committee.

Long story short — the various bailouts, including TARF (Term Asset-Backed Securities Loan Facility,) opened the Federal Reserve to risk — but it seems likely that they investments will eventually be profitable.

The CBO’s assessment supports the assertion of Fed officials that the purchase of toxic assets from Bear Stearns Cos. and American International Group Inc. will eventually be profitable. The CBO estimates that the Fed will earn $2 billion each from the two programs it created to help AIG and $200 million from the Bear Stearns rescue.

The CBO report estimates the earnings will remain above $70 billion in 2011 and fall to $41 billion by 2013 before rising to $55 billion by 2020.

Fed May Send Record $70 Billion to Treasury, CBO Says [Businessweek]