There was something odd in today's quarterly financial report (as of March 31) by the world's largest and most profitable hedge fund: the US Federal Reserve. Despite that its Assets Under Management have grown to a mindblowing $3.4 trillion, or about $700 billion more than this time last year, there was something oddly missing in the reported data: a surge in remittances to the US Treasury, or profits. Well, the Fed did remit some $15.3 billion to the Treasury, so not too shabby, but this was well below the $23.8 billion in Q1 2012 and under half of the remitted profit of $30.7 billion in the previous quarter. Has the world's most profitable portfolio manager, a Princetonian economist who has otherwise never traded one security in his entire life, gone cold? Please Ben, proves us wrong. And while you are at it, get to work, Mr. Portfolio Manager.
Looking at the actual P&L, it appears that while total interest income, or the profit from holdings all those trillions of Treasurys and MBS was roughly in line if a little smaller than last year, it was the non-interest income (and losses) that have impacted the Fed's profits. Specifically, the $4.3 billion in income from consolidated entities was no longer there, and neither were there $2.8 billion in treasury securities gains as a result of the Fed conducting Twist in 2012 (including selling of TSYs in addition to buying), but more notably, there was a $1.3 billion loss on foreign currency translation.
So, we were wondering, just which US assets held at the US Fed were (adversely) impacted by a movement in the US dollar?
And now for the best news (if only for the Fed's employees): salaries at the Fed rose by 11.7% in one year, from $708MM to $791. But that's nothing. As the chart below shows, salaries and benefits rose on average over 13% compared to last year: not bad for a country which is supposedly crushed by intolerable austerity and the evil sequester.
Now unless the Fed has gone on a hiring spree, maybe Bernanke can also explain just which CPI he is using when calculating the indexing of Fed wages to "inflation."
Either way, we are glad to see that Bernanke has adopted the "best" hedge fund operating practices, when it it thinks it is entitled to boost wages by over 10% even as its P&L has plunged by 50% Y/Y?.