Seeking Alpha

Charles A. Smith's  Instablog

Charles A. Smith
Send Message
Charlie Smith – Principal and Chief Investment Officer of Fort Pitt Capital Group. Charlie is a graduate of Penn State University and lives in Marshall Township, PA.
My company:
Fort Pitt Capital Group
My blog:
Ramparts
  • Can You Spell Perpetual Motion? 0 comments
    Mar 22, 2011 12:56 PM
    The following (italics) is excerpted from today's release by the Fed concerning it’s "financial results" for calendar 2010 (my editorial notes in bold):

    The Reserve Banks' comprehensive income increased $28 billion over the previous year to $82 billion (+52%!!!) for the year ended December 31, 2010. The increase was primarily attributable to an increase of $24 billion in interest earnings on the federal agency and GSE MBS holdings.
     
    The Reserve Banks transferred $79 billion of their $82 billion in comprehensive income to the U.S. Treasury in 2010, a $32 billion increase (+68%!!!) from the amount transferred in 2009.
     
    So, let's get this straight. The Treasury borrows from, and pays interest to, the Fed, and then the Fed simply skims some (in 2010 it was 3.65%) of the interest paid by the Treasury for itself, and then gives the rest back to the Treasury!

    What then is the effective cost of such borrowings? It is certainly FAR LOWER than the cost of funds borrowed elsewhere. Why wouldn’t Treasury therefore want to borrow EVERY LAST DIME IT CAN from the Fed? Wouldn’t this be in the best interest of taxpayers? Inquiring minds want to know…


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Back To Charles A. Smith's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • I said 15 months ago that JOE should take material writedowns & move on.Today it finally happened.
    Jan 27, 2012
  • Sanjiv Wadhani has some splainin' to do...as Juniper cuts guidance...
    Jan 9, 2012
  • Softie hitting 6-month hi on big volume...
    Jan 6, 2012
More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.