How does the Fed make money for its owners?

It’s not as most people think. The interest the Fed makes on its bond holdings in miniscule compared to the money it can generate from its many unreported activities. Their biggest profits are all indirect and “off the books”. Take the Mexican bail-out, where Mexico was getting ready to default on fifty billion dollars’ worth of bonds. The primary loser would have been Salomon Brothers, and the secondary loser would have been J.P. Morgan & Company. Secretary Rubin, who was former vice-chairman of Solomon, told Congress it was of vital national importance that Mexico did not default. Then Clinton acted without Congressional approval and just gave the money to Mexico. And Mexico gave the cash directly to Salomon, Citibank and the other New York banks that run the Fed. That was a classic example of how the Fed makes money for its owners.

Leave a comment

Your email address will not be published.