The U.S. Federal Reserve’s 2010 net income grew to $80.9 billion largely due to a boost in earnings from securities it acquired during the financial crisis, according to preliminary unaudited results the central bank announced Monday. (short article below)
(http://blogs.wsj.com/economics/2011/01/10/fed-transfers-784-billion-to-treasury-for-2010/)
The Fed is transferring $78.4 billion of this income to the Treasury Department. What do you think the Treasury Department will do with the payments? What do you think they should do?
In 2010, Obama signed the Dodd Frank-Wall Street Reform and Consumer Protection Act. This statute, imposed stricter rules on banking and securities trading in hopes of preventing the same unsustainable and questionable finance practices that caused the crisis. This act requires constant industry monitoring, and is primarily funded through extra fees and taxes on trading, which could cause potentially damaging inefficiencies to a recovering market. I would like to see much of this money be used to enforce these regulations to help relieve the tax burden.
ReplyDeleteI am not sure what they are going to do with the $78 billion. I am sure they have some sort of plans, since this is the highest earnings ever posted by the Feds. But I feel like they should invest some of it into funding new ways of helping out smaller banks instead of us backing these huge global banks, which led us into recession again. We need to start learning from our mistakes and try to pull ourselves out of this hole. On a side note, that yahoo article said the US should stop making pennies and possibly nickels because of how high the cost is to make one. This is a Treasury responsibility that is costing ourselves more debt. Maybe a good idea?
ReplyDeleteI really have no idea where the money will end up either. Maybe we'll learn from our mistakes and instead of bailing out large corporations that in turn use the money to give themselves pay raises we'll put money into projects like the one Ashley mentioned, but I'm not sure what they'll do either way.
ReplyDeleteUnemployment is currently above 9%, so programs designed to fight the problem could be a good place to start.
I agree with Brooks, with such a huge increase from last years earnings I'm sure the Treasury Department has a place to put it. I honestly don't know much about this topic, but I think that small banks could benefit significantly from these earning and could help not only these small banks but many small businesses as well. With increased help from smaller banks small businesses may be an answer for solving the high unemployment issue.
ReplyDeleteThat is a lot of money with potential to be placed into great use. I agree with brooks and feel like our government shouldn't be held responsible for supporting the big banks and corporations filing for bankruptcy.
ReplyDeletePerhaps the two most beneficial and advantageous fields to look into would instead be into the nation's health and education department. With a better rounded public, with access to state of the are health and educational resources, the treasury will display a strong focus in the future of this nation, hopefully putting this unpleasant past behind us.
I don't know a lot about the responsibilities of the treasury department either, but I think it would be interesting to see the aftermath of removing pennies and nickels from our monetary circulation. I feel pennies especially are unnecessary, let’s be real.
I also find those new infomercial that are coming out very interesting.. Where the treasury prints off collectable coins and bills, then sells them for way more than they're worth.
Here's an interesting example: http://www.youtube.com/watch?v=E1dHpX1qrUw
While I am hardly aware of the treasury dept and its duties I do think removing currency would fall under the Federal reserve. While pennies may hardly be used to purchase anything wholly they do come in handy when trying to find exact change. Moreover, removing pennies from circulation would be a monetary policy act by the government (which is what lead me to assume it should come under the Feds) and the effects would be deflationary and, if I'm correct, the inflation rates of the US are pretty low and quite stable. The transaction costs associated with the removal of the pennies might possibly also make the whole endeavor not worthwhile to do! These infomercials really are quite interesting. The only sane reason I can think of (economics based thinking obviously) why the treasury would do this is in some ways the same as a bond. But then again how does the market for such coins and bills actually work - my guess would be that it would not be anything like the financial market of bonds etc. It is though an investment at the end of the day since if these are collectibles then the price is surely going to go up in the future but how much does a treasury initially charge and do they actually intend to make it as a financial investment too?
ReplyDeleteIn terms of where the money should be spent, I would like to see the money being spent on, as has been mentioned above, unemployment (benefits or job creation), education sector, infrastructure maintenance - it really is in shambles, and local/regional banks and financial institutions!
Who knows what they will do with the money. Personally, I think they should use it to pay off everyone's crappy mortgages. Its our money anyway yes? That would free up lots of disposable income that we would surely go out and spend on "stuff" I know if I had an extra grand in the bank every month, I would be spending a fair amount of it. Multiply that by 200 million Americans, and you have the potential to shove the recovery forward rather than watch it crawl along in diapers. Im all for reasonable taxes, but I am equally in favor of returning what you dont use.
ReplyDeleteI agree with the majority of you that thinks the Treasury Department should put the money towards the unemployment crisis. Our country is in desperate need of job creation, and I think this money would be well spent going towards this. I wonder if some of this money could go towards paying off some of our national debt too, seeing that we are quickly approaching our debt ceiling which could severely hurt the credit of the US if we reached a state of default. Also, I think the idea that the US could stop making pennies/nickles due to the high cost to make them is very intriguing. I wonder if the US could benefit from getting rid of these coins or if it would cost more to get rid of them than it costs to keep them in production.
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