Banks Squirm as Congress Moves to Cut the 6% Dividend Paid to Them by the Fed

piezoe said:
You may not have been thinking of profits net of expenses. The Fed considers the interest they have to pay to member private banks for use of their capital to be part of their operating expense. They refer to this fee, fixed by law, somewhat oddly I think, as a "dividend", and I suppose that goes to their unfortunate, loose use of the word "stock". One hundred percent of Fed profit does flow to the Treasury, but that is profit net of expenses of course. What else could it be? As a matter of fact, I think I have always been pretty careful to say 100% of net profit, or 100% of profit after expenses, haven't I?

I'm not exactly sure what the "arguments" were in the zero hedge article. Were they suggesting that the Fed should not compensate these private, for profit banks for use of their capital? Or were they just trying to make the point that the interest is too high. Or was their point that banks prefer to make more rather than less? I think a valid argument can be made in support of altering the interest rate, i.e., the "dividend". I have expressed my own opinion that the rate itself should not be fixed by statute, but rather linked by formula to the Long bond.
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The point of the article is to point out how upset bank lobbyists got when word that the 6% dividend would be cut to 1.5% came down. The point was also to re-introduce readers to the idea that the Federal Reserve is actually owned by large banks (they are they shareholders) and that they also receive dividends - risk free - on their investment.

The Federal Reserve should not be paying any dividends. If member banks want the privileges that comes with being a member bank (discount lending, etc) then they should have to invest without dividend. Or, better yet, the Fed could actually be a government entity and not require any investment, not have any controlling interest given to banks (light that will happen).

Regardless, "all profits go to the Treasury" is misleading, as part of the profit is paid to dividends.
 
Tsing Tao said:
This is a joke, right?
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no, not really, I am very ignorant when it comes to the federal reserve. Out here where I live we have big reservoirs, and during times of rain the Army Corps of Engineers damn them up, and in times of drought they open the flood gates. I assume that is what the federal reserve tries to do with money. I was just wondering how much they get paid for that service. 6% sounds a little high.
 
loyek590 said:
no, not really, I am very ignorant when it comes to the federal reserve. Out here where I live we have big reservoirs, and during times of rain the Army Corps of Engineers damn them up, and in times of drought they open the flood gates. I assume that is what the federal reserve tries to do with money. I was just wondering how much they get paid for that service. 6% sounds a little high.
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and if you go out at night catfishing near one of those damns, every dumbass fisherman will have an opinion on what they should do, and no matter what they do someody is bitching
 
Tsing Tao said:
The point of the article is to point out how upset bank lobbyists got when word that the 6% dividend would be cut to 1.5% came down. The point was also to re-introduce readers to the idea that the Federal Reserve is actually owned by large banks (they are they shareholders) and that they also receive dividends - risk free - on their investment.

The Federal Reserve should not be paying any dividends. If member banks want the privileges that comes with being a member bank (discount lending, etc) then they should have to invest without dividend. Or, better yet, the Fed could actually be a government entity and not require any investment, not have any controlling interest given to banks (light that will happen).

Regardless, "all profits go to the Treasury" is misleading, as part of the profit is paid to dividends.
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The Fed itself actually IS a government entity, but the Branch Banks are a government-private hybrid. The stock private banks are required to "buy," as a condition of joining the Federal Reserve Banking system, does not impart ownership. But never mind these little details. The You Tube account is far more entertaining. Banks generally don't borrow through the discount window.
 
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Not everyone would agree that the government should be able to use private capital without compensation. That sounds a bit "socialist" to me. :D
 
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Tsing Tao said:
The point of the article is to point out how upset bank lobbyists got when word that the 6% dividend would be cut to 1.5% came down. The point was also to re-introduce readers to the idea that the Federal Reserve is actually owned by large banks (they are they shareholders) and that they also receive dividends - risk free - on their investment.

The Federal Reserve should not be paying any dividends. If member banks want the privileges that comes with being a member bank (discount lending, etc) then they should have to invest without dividend. Or, better yet, the Fed could actually be a government entity and not require any investment, not have any controlling interest given to banks (light that will happen).

Regardless, "all profits go to the Treasury" is misleading, as part of the profit is paid to dividends.
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Why not write the Fed and ask them to revise their accounting method so they won't mislead you any more.
 
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piezoe said:
The Fed itself actually IS a government entity, but the Branch Banks are a government-private hybrid. The stock private banks are required to "buy," as a condition of joining the Federal Reserve Banking system, does not impart ownership. But never mind these little details. The You Tube account is far more entertaining. Banks generally don't borrow through the discount window.
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Banks don't borrow from the discount window? Shall we go back to 2008 and talk about the report that the Fed fought tooth and nail to prevent being released - the list of banks who had to use the discount window?
 
piezoe said:
Why not write the Fed and ask them to revise their accounting method so they won't mislead you any more.
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Probably because I realize that the Fed prefers to mislead people. It opts for opaqueness, pretending to desire transparency. Kinda like the Obama administration.
 
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