A popular refrain in the ongoing debate about the cost of health care in the United States accuses health insurers of making record profits at the public's expense. During a press conference last year, President Obama put it this way:
What then should we make of the fact that the Federal Reserve just announced record profits of $47.4 billion in 2009? The Fed is not a for-profit venture, but it makes money on the Treasury securities that it holds. More interesting, though, is the fact that the Fed made $20.4 billion in interest in 2009 from all of the mortgage-related debt and securities it has purchased in order to bail out banks and shore up the financial markets. I wonder if a rewrite is in order.
Some good news. All those profits don't line the pockets of government officials. Instead, they are transferred to the Treasury so the Treasury can pay more interest to the Federal Reserve so the Federal Reserve can pay profits to the Treasury so that the Treasury.... It's enough to make your head spin. Maybe I am feeling a little bit hammered.
"There have been reports just over the last couple of days of insurance companies making record profits, right now. At a time when everybody's getting hammered, they're making record profits, and premiums are going up."The inaccuracy of that statement is pretty easy to prove, but let's take it at face value for now and agree with the assertion that record profits are a bad thing, especially when the customers who fund those profits are hurting economically. (Let's also agree that President Obama doesn't really think we're all staggering around drunk when he says "everybody's getting hammered".)
What then should we make of the fact that the Federal Reserve just announced record profits of $47.4 billion in 2009? The Fed is not a for-profit venture, but it makes money on the Treasury securities that it holds. More interesting, though, is the fact that the Fed made $20.4 billion in interest in 2009 from all of the mortgage-related debt and securities it has purchased in order to bail out banks and shore up the financial markets. I wonder if a rewrite is in order."There have been reports just over the last couple of days of the Federal government making record profits, right now. At a time when everybody's getting hammered, we're making record profits, and mortgage payments are going up."Keep in mind where the profits are coming from. They're coming from people paying their mortgages and the US Treasury paying interest (i.e. redirecting taxes) to cover all the money it's borrowed. Aren't those groups among those "getting hammered"? Contrast that with the "record profits" in the health insurance industry last year. In 2009, the top 11 health insurance and managed care companies made a combined profit of $12.8 billion. That's about a fourth of what the Fed made, and the Fed wasn't even trying.
Some good news. All those profits don't line the pockets of government officials. Instead, they are transferred to the Treasury so the Treasury can pay more interest to the Federal Reserve so the Federal Reserve can pay profits to the Treasury so that the Treasury.... It's enough to make your head spin. Maybe I am feeling a little bit hammered.
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