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"Get To Work, Mr. Portfolio Manager" - Federal Reserve Profits Plunge Even As Salaries Surge

Tyler Durden's picture





 

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?.

 


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Fri, 05/24/2013 - 12:45 | Link to Comment francis_sawyer
francis_sawyer's picture

CheesePopes runnin' the book... [& expect to be well compensated for their hard work]...

Fri, 05/24/2013 - 12:47 | Link to Comment krispkritter
krispkritter's picture

Blow 'this' bubble Bernanke!  (Too soon, too soon?)

Fri, 05/24/2013 - 13:08 | Link to Comment Ham-bone
Ham-bone's picture

Ben's ready...here comes the 1pm urgent buyer ramp.  Ignition in t-minus three minutes.  Ben and his merry minnions are strange traders though...they can never sell their winners, can't sell their losers.  Can't sell anything.  Only buy and buy moar.  Forever and ever.  Amen. 

Fri, 05/24/2013 - 13:10 | Link to Comment fourchan
fourchan's picture

DON'T DEVALUE ME BRO!

Fri, 05/24/2013 - 13:16 | Link to Comment Ham-bone
Ham-bone's picture
  4 chan     A site that shall be around for the rest of existence. It is filled with everything imaginable you would see in this awfull world and...the unimaginable. If you like Hentai, random pictures, hot chicks, ugly chicks, people stuffing their wangs into skulls from the catacombs, or anything else different from your daily life, this is the site for you.

 

Had to google you...actually my freshman son knew this one.

Fri, 05/24/2013 - 14:45 | Link to Comment NihilistZero
NihilistZero's picture

Francis i've seen you get some flack from people for your views on CheesePopes.  I'm sure you've been asked this before, but you do make a distinction between the CheesePopes and the regular Popes right???  Vis-a-Vis, even though Mafiosos are criminal scum you wouldn't take that out on all Italians right???  Can you really hold a whole group of people responsible for the actions of their worst?  I mean I'm an American and view Bronco Bama as atotal piece of shit.  I'd be pretty bummed if somebody hated me just because I live in the country that elected him.

Fri, 05/24/2013 - 12:45 | Link to Comment 101 years and c...
101 years and counting's picture

ben admitted to congress remittances were going to drop.  its what happens when HE buys MBS for 100 cents on the dollar when they would be valued at 25-30 on the open market.  Face it, the FED is actively passing on losses from the TBTF criminal mother fucking banks onto the Treasury/Taxpayer.

Fri, 05/24/2013 - 13:12 | Link to Comment fourchan
fourchan's picture

BING-FUCKING-OH!

Fri, 05/24/2013 - 13:18 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Has been going of for 100+ years.  You see, the problem is they also create the credits that your "representation" uses to get elected.  Roll the mother fucking guillotines and let's get this "watershed" event in history over with already.

Fri, 05/24/2013 - 14:49 | Link to Comment NihilistZero
NihilistZero's picture

Paradoxically though the taxpayers that pay the most are those in high finance.  So if the losses of high finance are passed on to the taxpayers of high finance itself is that not robbing Peter to pay Paul???  (not counting the infaltionary tax we all pay of course)

I think it's more about keeping the power/money in the hands of TPTB.  There are no real profits and losses at that level of the economy just the uber rich playing monopoly with each other.  As George Carlin said "It's a big fuckin' club, AND YOU AIN"T IN IT!"

Fri, 05/24/2013 - 12:47 | Link to Comment EscapeKey
EscapeKey's picture

Wait, so the company in charge of printing money is so inept, it hardly churns out a profit?

Seriously, though - the reaon is no doubt because they've found a loophole to channel all the profits into JPM's account, rather than having to pay it to the pesky treasury. I mean, seriously - why should the common peasant get any reward out of their crony system?

Fri, 05/24/2013 - 13:17 | Link to Comment LawsofPhysics
LawsofPhysics's picture

So stop accepting their prommisory notes in exchange for your labor.  Problem solved.

Tue, 05/28/2013 - 14:31 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Long-term this is correct. Short-term it leaves no notes upon which taxes are paid and despite the IRS admitting under oath that taxes are voluntary, they’ll still imprison you for it.

Fri, 05/24/2013 - 12:48 | Link to Comment Smuckers
Smuckers's picture

Now I wish I went to Helicopter Pilot School like my parents wanted me to.....

Fri, 05/24/2013 - 12:53 | Link to Comment krispkritter
krispkritter's picture

You mean Drone U?  There's an app for that so Ben doesn't even have to leave his chair...

Fri, 05/24/2013 - 12:49 | Link to Comment TheEdelman
TheEdelman's picture

Nice catch Ty... Where can I purchase a position in fed "Salaries and Benefits"?  They are performing well.

Meanwhile, moar 11inch horse meat shenanigans continue...

http://www.dailymail.co.uk/news/article-2330116/Scores-TGI-Fridays-New-Jersey-busted-selling-caramel-colored-rubbing-alcohol-shelf-scotch-statewide-crackdown-dubbed-Operation-Swill.html 

Fri, 05/24/2013 - 12:54 | Link to Comment Bastiat
Bastiat's picture

Jeez, I thought rubbing alchohol was toxic?

Fri, 05/24/2013 - 13:01 | Link to Comment krispkritter
krispkritter's picture

Methanol definitely is. Isopropyl will make you ill but less likely to kill you I think.

http://www.thetimes.co.uk/tto/news/uk/article3768165.ece

Fri, 05/24/2013 - 13:05 | Link to Comment TheEdelman
TheEdelman's picture

Technically (i hate that word), all alcohol is toxic.  In order of toxicity (given equal parts) to the human body:

Drinking alcohol (Ethyl) -  youre buzzing

Rubbing alcohol (Isopropyl) - youre nauseous/vomiting

Wood alcohol (Methyl) - youre blind

I'm sure whatever they used was diluted enough with water to not make ya too sick.

Fri, 05/24/2013 - 12:50 | Link to Comment The Thunder Child
The Thunder Child's picture

OT

World Wide March Against Monsanto

TOMORROW 2pm Everywhere

Get out and let your voices be heard, help to stop GMO and the takeover of our food supply!

Monsanto can be stopped, the first victores have all ready been won

http://www.politicolnews.com/hungary-burns-all-monsanto-gmo-corn-fields/

Fri, 05/24/2013 - 12:50 | Link to Comment WarPony
WarPony's picture

beennnayy only has to pass along 94% of net profits, so maybe they all replaced their solid-gold toilets last quarter?

Fri, 05/24/2013 - 12:52 | Link to Comment IamtheREALmario
IamtheREALmario's picture

Now if we only knew how many employees the Federal Reserve had then we would have a salary per employee number.

Fri, 05/24/2013 - 12:57 | Link to Comment EscapeKey
EscapeKey's picture

I think you'll find there are more people being paid a salary by the Fed, than their number of salaried employees.

Fri, 05/24/2013 - 12:52 | Link to Comment Atomizer
Atomizer's picture

The Quantitative Sleazing Tapeworm show must go on!

Fri, 05/24/2013 - 12:54 | Link to Comment booboo
booboo's picture

Bureau of Consumer Financial Protection got a nice kicker too, I know I feel safer now that the sociopaths have moar money.

Fri, 05/24/2013 - 12:56 | Link to Comment EscapeKey
EscapeKey's picture

Hmm, looking through the data:

Total interest income: 19,335

Total assets $3,205,360

 

So, correct me if I'm wrong, but doesn't that suggest that the average yield is about 0.6%? The 10 year is currently @ 2%, 5-yr @ .89%, and 2-yr @ 0.25%. Surely this means the composition of their "assets" is at the extreme low maturity type? Isn't that in sharp contrast to all their rheroric about buying long-term, aka "operation twist"?

Reminds me of when Northern Rock went bust over here in the UK. They financed operations via 3 and 6-month paper. Once the liquidity dried up, they went bust virtually overnight.

 

Fri, 05/24/2013 - 13:02 | Link to Comment disabledvet
disabledvet's picture

"ah, to be a Government Bank." whoever wrote this article is really good. obviously they don't want the Fed's losses to be put back into the private sector...of course neither did the Government want to take "the Call" when Wall Street imploded. "there is a war going on here." hmmmm. what is the Fed's job again Soc Gen?

Fri, 05/24/2013 - 13:13 | Link to Comment TheEdelman
TheEdelman's picture

I cant correct you nor can I say youre right or wrong bc ts all part of the beauty of accounting. 

3000 years from now, when "today" is considered ancient times, there will be a profession in archaeology for translating ancient GAAP.

Tue, 05/28/2013 - 13:43 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

And in that same era they’ll look at the “accounting” of today the way we look at Roman vomitoriums and government-run coin-shaving or paying soldiers in salt. It’s quite hiliarious… except we’re living in it.

Fri, 05/24/2013 - 13:44 | Link to Comment Tyler Durden
Tyler Durden's picture

That's the interest income in Q1

Fri, 05/24/2013 - 13:03 | Link to Comment Dr. Engali
Dr. Engali's picture

The fed employees salaries went up by 13% in nominal terms to compensate for the 6% inflation the fed is generating. In reality they got a 7% increase while the rest of us get the shaft.  

 

We just met with our healthcare agent and our premiums are going up 20.3% over last year. We have over double in cost since Obama care came into being. So I say a big fuck you Obama and Ben...go screw yourselves you cock suckers.

Fri, 05/24/2013 - 13:04 | Link to Comment krispkritter
krispkritter's picture

So is the shaft 13% or 7% bigger? Just want to know how soon to start squealing...

Shit, lunch is over. Back to the dungeons...

Fri, 05/24/2013 - 13:17 | Link to Comment TheEdelman
TheEdelman's picture

With the O-Care going into effect jan 1... late Q4 is going to get real.

Everyone get ready to show your Oh face!

"Oh... Oh... Oh! You know what I'm talkin' about."

Fri, 05/24/2013 - 13:01 | Link to Comment Handful of Dust
Handful of Dust's picture

Financial industry is a Good EZ 'Life of Riley' for many....no down side for them despite miserable performance.

Fri, 05/24/2013 - 13:05 | Link to Comment Monedas
Monedas's picture

Government work is the Life Of Riley .... for all the Rileys who work .... have a pulse .... during working hours .... around the government water cooler economy !     Monedas     1929      

Fri, 05/24/2013 - 13:12 | Link to Comment LawsofPhysics
LawsofPhysics's picture

The financial sector took over the fucking government dipshit, so yes, you are both right.  Let it fucking die already.

Fri, 05/24/2013 - 13:08 | Link to Comment EscapeKey
EscapeKey's picture

If they're doing "God's work", can't we pay them in prayer?

Fri, 05/24/2013 - 13:01 | Link to Comment Monedas
Monedas's picture

If you can print money, expand credit and manipulate at will .... you damn well better be able to turn a profit ?

Fri, 05/24/2013 - 13:02 | Link to Comment Seasmoke
Seasmoke's picture

Time to suspend Kevin WITH Pay.

Fri, 05/24/2013 - 13:05 | Link to Comment nbsharma
nbsharma's picture

Clearly, weather impact. :)

Fri, 05/24/2013 - 13:16 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Let's see, management and owners compensation rising while running the "company" (insert your favorite business - bank/broker etc.) and shareholders value into the fucking ground, sounds about right.  Nothing changes until these fuckers lose their heads.

Fri, 05/24/2013 - 13:19 | Link to Comment timbo_em
timbo_em's picture

So when will Benny and the Inkjets demand 2/20 for their great work?

Fri, 05/24/2013 - 13:37 | Link to Comment vote_libertaria...
vote_libertarian_party's picture

Has anybody seen an analysis of what happens when the Fed MBS purchases have losses?  

 

Let say they bought some MBS bonds (for example).  They mature in 2014. The administrative bank that collected the loan payments (JPM, Citi?) suddenly tell the Fed 'Ooopsy, you are only getting 50% of the principal back because so many people defaulted.'

 

What happens then?  Do they ask their member banks for a capital infusion?  Print?  How does the accounting work?  Would we ever hear about losses?

Tue, 05/28/2013 - 13:35 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Regular banks are allowed to mark to fantasy but the Fed will give you the straight up answers. I mean really , /sarc already.

Fri, 05/24/2013 - 13:54 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Must be paying OT for the 3:30pm ramps in ES. I mean c'mon they start at 9:00am.

Fri, 05/24/2013 - 14:03 | Link to Comment Comaboy
Comaboy's picture

Examiners, boys and girls. That 'splains the rise in headcount. Going to keep the system safe for all those NY folks.

Congress gave the Fed responsibilities it didn't have before Dodd-Frank.

Fri, 05/24/2013 - 16:39 | Link to Comment Darkside
Darkside's picture

Now help me out with this. I've been in the rackets for a while. I think I know a colossal pump and dump. So their buying all this shit and trying to sell it to the public as joe idiot hears on the radio that the market "just keeps going up" This is going to be beautiful. 

Sat, 05/25/2013 - 01:32 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

and there are those who say qe isn't working.

Sat, 05/25/2013 - 01:37 | Link to Comment WallowaMountainMan
WallowaMountainMan's picture

so in truth, in the post, when i got to where billion was the quantity discussed, with a singel digit number in from of it, i thought, 'margine of error' and let the article go at that.

 

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