New York (CNNMoney.com) - Federal Reserve chairman Ben Bernanke said Monday he's confident the Federal Reserve will make money on the trillions ithas pumped into the economy since the start of 2008.
"I think we're in very good shape," Bernanke said, answering questions following a speech at the Economic Club of Washington. "I do believe we're going to get back all the money, and indeed we'll be showing for the taxpayers fairly significant extra income."
Bernanke was referring specifically to Fed programs - not the Troubled Asset Relief Program (TARP). The U.S. Treasury will likely lose money on TARP, though the Obama administration is expected to announce soon that losses will be $200 billion less than initially expected.
The Fed has actually pumped far more money into the economy than Treasury did through TARP.
Its balance sheet soared to $2.2 trillion currently, from less than $900 billion before the financial crisis began in 2008.
The book on some of that lending is already closed. For example the Fed has stopped extending money for commercial paper, a form of short term borrowing used by the nation's largest corporations. The Fed had nearly $300 billion in commercial paper on its balance sheet a year ago, but has only about $15 billion today.
The company that was the biggest recipient of help from the Fed was insurer American International Group, which at one point in October 2008 owed the central bank nearly $90 billion. While the firm has yet to start paying back that money in cash, the government has taken various assets and units of the company in lieu of payment. The Fed intends to sell those assets in the future when they have a better market value.
Today, the Fed has AIG loans of only $20.7 billion.
In his comments, Bernanke did not specify if the Fed will make money on
the AIG transaction itself, or if losses there will be covered by other actions by the Fed during the crisis.
Much of the Fed's efforts to pump money into the economy came through the purchase of mortgage securities backed by finance firms Fannie Mae and Freddie Mac, as well as the debt issued by those companies. It eventually plans to purchase $1.25 trillion of those mortgages and $175 billion of that debt. It has also purchased about $300 billion in U.S. Treasurys.
Most of Bernanke's speech was focused on the outlook for the U.S. economy, and he repeated his earlier forecasts of moderate growth through next year, dogged by continued high unemployment.
Bernanke said that the U.S. economy continues to face "formidable headwinds" that are likely to result in only a moderate recovery.
He said credit remains tight for consumers and small businesses and that the labor market remains weak, despite an end to the deep job losses earlier this year.
"Household spending is unlikely to grow rapidly when people remain worried about job security and have limited access to credit," he said.
Bernanke repeated earlier assurances that inflation is not a deep concern, despite the trillions of dollars the Fed pumped into the economy.
And he's confident that the changes being made in oversight of banks and Wall Street should prevent another crisis such as the one that hit financial markets a year ago.
Hey Bernanke what are you going to do about the inflation that is just around the corner?
Since the Fed is going to make a profit off the back of all us hard working folk, does that mean we can expect some kind of re-distribution back into our pockets? Dillon, SC, please call Ben home, please......
Well great then, why don't we just go into the bailout business? Nobody's buying what you're selling. I am sure we are profiting from the Democratic created housing crisis.
The bail out money plus the interest was supposed to pay down the debt and now nobama and the tax and spend demorats wants to spend this money also. There needs to be a movement to impeach nobana.
Since when did you become a trader Mr. Ben????
You were the usual Fed Chief under Cheney – it is clear now that there is no administration under NoObama – it's all Games!!!
I wish Bush-Cheney had a third term!
So not only the govt. is going to lose less money (circa 200 billions) in the TARP program as it was expected that it would happen but also the Fed is going to profit with the bailouts?
Let's see the delusional spin of the GOP trying to make this a bad news...
How nice.The Fed is a Private Bank.We wont see a dime of the money they made from their ponzi game.Bernanke is the biggest crook on Earth.
Well, that is just great. Is this the same guy that caused all this financial mess with his views on Banking etc.? If so, and he is bragging about making a profit on "our" money, then either give it back in tax credits or pay for the Afgan war with it and don't ask us for any money.
More smoke and mirrors from this guy...He needs the boot NOW...
Betcha you won't hear this news anywhere on FOX. The money is being repaid with interest, but hey, Obama is just giving away billions to banks...no, righties, that was your revered Bush, who couldn't give away money fast enough, whether to his no-bid buddies on war expenses, or to his oil and banking friends. Like it or not, this is GOOD NEWS from the OBAMA administration.
So are Republicans happy – or are they seething that after knocking the TARP at every opportunity it now is going to throw a "wet towel" on the naysayers?
Seems to me that all those Right-Wingers are good for is running to mamma's skirt and looking for Dick Cheney to "protect" them.
That's just great that the fed is making a profit. But so are all those GREEDY corporate charlatans with all their BONUSES.
I am a pissed-off American – next let's let them fail and stand in welfare lines!
...just telling the people what they want to hear.
Sorry, we can't spend irresponsibly and then magically make it go away. Bernanke and Obama are going to sell their lies about the economy, but the truth is that their spending hasn't helped and the economy is bound to recover despite their idiocy–it always has.
Obama needs to stop growing GOVERNMENT JOB (big government) and STOP SPENDING TAXPAYER MONEY!
I'm glad somebody is making money–of course it is the government. Us plain folks don't have a snowball's chance......
We have all been assured by every Conservative in the House and the Senate that this is impossible, not true, false, a lie, Liberal nonsense, and absolute baloney. They all told us that any interference by "the government" would reduce the pristine purity of "the free market" and that chaos would be the result. They all voted against these measures.
So what new lie will they be telling to make the original lie seem credible? Most likely they will assure us that they were never against it in the first place. Perhaps they will say that the economy would have recovered faster if the Obama policies had never been put in place. Perhaps they will concoct some other lie.
We'll just have to wait and see.
Hey Ben, How many of those toxic assets dud you buy back?
Not sure that the govt should make a "profit" (which is really another way of saying "tax"). But also not sure the govt should have bailed them out in the first place.
Make a profit??? I have some shore-line property in Arkansas I want to sell Bernanke.
No worry though, once the "fourth grade mentally challenged tele-prompter reader" is done in 2012, and Palin takes over.....we will get this nation back to the "Real Thing". This nation is like when the Coca Cola Co brought out thier "New Coke".....remember that? and no one liked it as well as they did the old coke! They soon had to return to the "Real Thing" as this nation must do the same!
What about all the people who lost their jobs, foreclosures, suicides, divorces because of the corruption at the Federal reserve? Why aren't we having around the clock court cases and putting the guilty financial perpertraitors in jail?
There is not going to be anymore belief in a fiat money system until people go to jail that committed the fraud. Let's start looking behind the curtain of the Fed.
Of Course the Federal reserve will make a profit, LIES, how would the American people know differant? They have never (since thier founding in 1913) ever been audited. In 1913 the US dollar was worth 1.25 in gold, today it is worth four and half cents (CNN own calculation).
The federal reserve bank is a private bank it is NOT part of the Government! This bank is the biggest ponzi crime commited in the history of humankind. Pres. Wilson on his death bed stated that his approval of this bank was the greatest mistake in his presidentsy.
Listen to Ron paul and ADUIT the Fed lets really know who they owe besides the American taxpayer.
Here's the hope we need and not Limbaugh's et al hope for failure.
What would Bernanke know about making a profit? Let's think about this, print money, give it to banks at zero interest, allow them to invest it in government notes at 2%, and then allow them to return the principal. Hmmmmm, where is the profit, other than WALL STREET and those little special deals only available to our elected officials for friends and families?
If the feds make money, they'd better pump it back into supporting people, not big businesses.
No more "Too big to fail" bailouts! Been there, done that; never again!
Oh no. You can't use the "P" word in front of Obama supporters. Next thing you know they will have the DNC running ads all over saying how The Fed is ripping off the American people. Then they would want to nationalize it but eventually they will figure out that the Federal reserve is already nationalized.
Yes, this won't be on Fox news. Obama has only been in office 11 months and he was left a pile of crap by Bush. This are starting to turn for the better.
But I agree, no more sweetheart deals for the big banks.