@ Frank. have you finished your response?

If you are specifically concerned about the 6% dividend, that is just compensation for the fact that member banks are required to hold capital at their fed branch and they don't earn a competitive rate of interest on that capital.

I don't really understand your overlapping shareholdings comment, but I'm pretty sure any institution can only be a member bank at one Fed branch. Also, each member bank just gets one vote regardless of how many shares they own. Its not at all like being a shareholder of a fully private organization.

With respect to your accountancy firm points, I really have no idea. I don't know a lot about accounting or auditing.

and yes, finished my response.

@ Frank 6 % guaranteed, year in and year out, isn't a bad return you know. Don't sniff at it many of our larger coporations would be happy to earn this return on their activities.

The devil however lies in the detail. I believe that the Fed(s) creates money by issuing interest-bearing debt is that true? And if so is this a profitable for the member banks?

On the accountancy firms, if a citation is supplied then one should, if interested, examine the authorship of that reference. You supplied, with some enthusiasm, the ''audit'' of the Federal Reserve. In that context the nature of the auditing firm who supplied the report is highly relevant.

Furthermore
@ Frank taking this remark at face value and assumng that you have chosen a mean year for your example:

''About 95 percent of the Reserve Banks’
net earnings have been paid into the Treasury since the Federal Reserve
System began operations in 1914. (Income and expenses of the Federal
Reserve Banks from 1914 to the present are included in the Annual Report
of the Board of Governors.) In 2003, the Federal Reserve paid approximately $22 billion to the Treasur''


The missing 5 % over 97 years actually amoumts to 5/100*22*97 = 107 billion of your US dollars. Nice work if you can get it.

At face value this snippet is obscene:

''The Federal Reserve Bank of New York shaped Washington’s response to the financial crisis late last year, which buoyed Goldman Sachs Group Inc. and other Wall Street firms. Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after.''........................

The Federal Reserve Bank of New York shaped Washington’s response to the financial crisis late last year, which buoyed Goldman Sachs Group Inc. and other Wall Street firms. Goldman received speedy approval to become a bank holding company in September and a $10 billion capital injection soon after.

''During that time, the New York Fed’s chairman, Stephen Friedman, sat on Goldman’s board and had a large holding in Goldman stock, which because of Goldman’s new status as a bank holding company was a violation of Federal Reserve policy.

The New York Fed asked for a waiver, which, after about 2½ months, the Fed granted. While it was weighing the request, Mr. Friedman bought 37,300 more Goldman shares in December. They’ve since risen $1.7 million in value.''

http://www.nakedcapitalism.com/2009/05/conflict-of-interest-is-not-conflict-of.html

One of the comments on the story uses the term ''ethical nihilism''. Very appropriate I think.

Sorry, I don't want to get drawn into some wacky conspiracy theory debate. I just thought that Lando, Putin and others might find it interesting to see the balance sheet of such a huge organization. I also am interested in how central banks work. But I'm not very interested in discussing these weird theories about cartels and theft and perpetual interest and all this crap.

http://www.youtube.com/watch?v=PTUY16CkS-k

This is all that needs to be known ;)

Don't know if someone already posted this, but I didn't see it in any of the comments.

@ Frank I am sorry that you have withdrawn from the discussion. You will note that the original article on Friedman was in the Wall St. Journal. Sticking your fingers in your ears won't make it go away. Ditto your refusal to answer a straightforward question on the issuing of money by the US central bank and your refusal to discuss the practices of the large accountancy firms, meant to be guardians of our system.

@ Tom yep that is what is all about debase the currency so that the debts can be paid off. Very funny indeed.

I'll have to read this thread in greater detail. I'm an econ guy, but busy atm. Looks like a solid discussion went down though.

It was a solid discussion before Fulham plowed in here trying to start a flame war.

"The missing 5 % over 97 years actually amoumts to 5/100*22*97 = 107 billion of your US dollars. Nice work if you can get it."

Fulham what part of the fed being a profit center don't you understand? You're whining that the fed doesn't generate 100% profits for the US treasury? What is it supposed to do, operate via volunteers with no expenses whatsoever?

Did your report note that Friedman resigned from the NY Fed soon after the waiver was granted?

"And if so is this a profitable for the member banks? "

This can be clearly gleaned by looking at the balance sheet.

Distribution of comprehensive income: 2010 2009 (millions of dollars)
Dividends paid to member banks $ 1,583 $ 1,428
Transferred to surplus and change in accumulated other comprehensive loss 884 4,564
Payments to Treasury as interest on Federal Reserve notes 79,268 47,431
Total distribution $ 81,735

Member banks get 1.5 billion, Treasury gets 80 billion.
In 2009 the Fed got a plurality of its income from interest on treasuries. In 2010 most of it came from mortgage-backed securities.

Total distribution for 2009 - > 53,423

''Fulham what part of the fed being a profit center don't you understand? You're whining that the fed doesn't generate 100% profits for the US treasury? What is it supposed to do, operate via volunteers with no expenses whatsoever?''

I don't normally bother to respond to Putinisms, but it is on occasions such as this that I am pleased that I don't use the mute button (even for him). The complete ignorance that he displays on profit, which is in reality calculated after the deduction of expenses is a pure gem. Yes, as he says, economics is so devilishly complicated, especially for us mere natural scientists. Great Saturday morning entertainment, sets up the day nicely :-)

"Frank 6 % guaranteed, year in and year out, isn't a bad return you know. Don't sniff at it many of our larger coporations would be happy to earn this return on their activities..."

You do realize that a 6% dividend share is in fact 6% ROE for the member banks since the shares are not tradeable, right? In that case, you might want to look at this graph: http://images.flatworldknowledge.com/wright/wright-fig10_005.jpg?sessionGUID=4c7c7834-27c6-30b8-7cc8-20ce134a5dbc&webSyncID=7168c318-390a-61a8-322 -2e92d166b680&sessionGUID=4c7c7834-27c6-30b8-7cc8-20ce134a5dbc

from Money and Banking by Robert E. Wright and Vincenzo Quadrini - http://www.flatworldknowledge.com/node/29300#

Then this graph: http://federalreserve.gov/pubs/Bulletin/2009/articles/bankprofit/chart/fig1.gif

As you can see, such a ROE was not surpassed by industrial average only seldom in the 1935-2008 timespan. In 2010, it was back to 7% again. A long-term 6% ROE is nothing any bank would take pride in. Even with tightened regulatory framework, the banks will outperform 6% ROE with ease even though it won't be business-as-usual 10%+.

@ ulytau,out of interest what is the current bank rate?

If you mean primary credit discount rate, then 0,75%.

And these guys are still getting 6 % on their money guaranteed year in and year out? (Bank rate is a UK expression, my apologies). The Italians are in trouble because they now have to pay 6-7 % on their debt because they are viewed as a bad credit risk and these guys are still getting 6 % on their money guaranteed year in and year out.

But lets not worry too much about that, the devil lies in the detail and the 6 % is comparatively small beer. By the way if you and three friends of yours would like to please sell me some treasury bonds next week I will even tell you all what I am prepared to pay for them now, in advance. How's that for a deal?

And then the guys who work for me will go and work for you next year and, you never know, I will employ some of your guys at my office. Then they will all sit on a remuneration committee to work out a fair rate of pay for one another's jobs. Lovely jubbly.

No man it is a racket from A-Z, I am afraid.

No, you are not afraid. You took it for granted before this thread even began and no amount of evidence would persuade you to change the opinion so goodbye.

OK goodbye to you too then. Newcastle v. Chelsea is a cracking game. If you can get it where you are then I recommend that you tune in.