marketplace.org / Interview by Jeff Horwich Marketplace Morning Report for Monday, December 31, 2012
While leaders in Washington stare down the fiscal cliff, let’s not forget the fiscal fact that brought us to the edge: The annual U.S. government deficit of more than a trillion dollars.
But through it all, one government-related entity has been hauling in record surpluses. New data capture the scope of profits at the U.S. Federal Reserve, estimated to be $90 billion this year.
“The last five or six years their profits have roughly tripled,” says Allan Sloan, senior editor-at-large at Fortune Magazine.
According to Sloan, the Federal Reserve owes its success to its practice of buying securities with newly printed money.
“If you go out an buy $2 or $3 trillion of securities that pay interest and you don’t have to pay any interest on the money used to buy the securities, you make a lot of money,” says Sloan.