– James Saft is a Reuters columnist. The opinions expressed are is own. –
Now finally we see what it takes to be a profitable bank with no capital worries and secure funding: own a printing press.
Sadly, since it is the Federal Reserve showing record $46 billion profits last year we have to conclude that, though it is a fool-proof plan, it’s not really scalable.
Combine news of the Fed’s biggest profit in its 95-year history with a report from the Troubled Asset Relief Program that its investments in banks are now showing a $7 billion gain and you’d be forgiven for concluding that this whole bailout malarkey is the next best thing to striking oil.
The two notional profits are of course related and prove little more than that if you have bottomless pockets you can make the price of a given asset rise. And while the trick for the Fed will be in how it exits its currently profitable positions, the real costs are more complicated and potentially much greater.