And just like that the Fed, also known as the printer of US currency, gave the Treasury a one time record bonus of $19 billion.
But wait, isn't direct funding of the Treasury against US policy: after all, hasn't Bernanke been on the record countless times repeating that the Fed does not monetize the US deficit?
What is going on here.
For the answer, go back to the $1.1 trillion spending deal which the "bipartisan" Congress fought so hard to get, and specifically the Highway Bill, which as a reminder would be funded with surplus funds from the Federal Reserve and part of the annual dividend banks get for owning shares of Fed regional banks.
As Bloomberg reported previously, the Fed’s surplus capital comes from the 12 reserve banks. "The highway bill would allow for a one-time draw of $19 billion from the surplus funds, which totaled $29.3 billion as of Nov. 25. If the surplus account goes above $10 billion, that capital would be swept to the government."
The US banking system, which is therefore indirectly funding the US highway bill, was not happy:
“This proposal is misguided and undermines a key agreement that has underpinned the U.S. banking system for a century,” ABA President and Chief Executive Officer Rob Nichols said in a statement. “Banks shouldn’t be used like an E-Z Pass to pay for highways.”
Read the rest here...