RBA cash rate

[Value Collector]

In case anyone was wondering, the Reserve Bank of Australia also pays its profits to the Australian government. (After it had deducted a portion to add to its permanent capital reserve), last year it paid $2.7 Billion to the government and added $1.2 Billion to its permanent reserve.

 

[mullokintyre]

I think you might have been reading some misinformation, the Feds profits definitely go to the government via the e US treasury department.

Last year the Fed handed over $107 Billion to the US treasury. (But yeah if you go down conspiracy theory rabbit holes they will not tell you that)

https://www.federalreserve.gov/newsevents/pressreleases/other20220114a.htm

OK, I have made an error.
I should have said that before any money is paid to treasury, a 6% dividend is paid to the member banks who own stock in the Federal reserve, assuming the Fed reserve makes a profit. ( according to Bloombergs it is currently running at an operational loss for the first time in its history ).
From Section 7 of fed reserve act
(a) Dividends And Surplus Funds Of Reserve Banks.

1. Stockholder Dividends.
   1. Dividend Amount. After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend on paid-in capital stock of--
      1. in the case of a stockholder with total consolidated assets of more than $10,000,000,000, the smaller of--
         1. the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of such dividend; and
         2. 6 percent; and
      2. in the case of a stockholder with total consolidated assets of $10,000,000,000 or less, 6 percent.
   2. Dividend Cumulative. The entitlement to dividends under subparagraph (A) shall be cumulative.
   3. Inflation Adjustment. The Board of Governors of the Federal Reserve System shall annually adjust the dollar amounts of total consolidated assets specified under subparagraph (A) to reflect the change in the Gross Domestic Product Price Index, published by the Bureau of Economic Analysis.

and just to add icing on the cake the very last sentence from the same section

c) Exemption From Taxation. Federal reserve banks, including the capital stock and surplus therein, and the income derived therefrom shall be exempt from Federal, State, and local taxation, except taxes upon real estate.

So the dividends are paid before the treasury gets a slice.
Mick

 

[divs4ever]

Ok, Google “federal reserve Rothschild” and you will get more than enough fake federal reserve stories than you can read in a life time ?

my first mentor , was a member of JBS ( John Birch Society ) and i was given a couple of books to read ( one was title None Dare Call It .......... )

( there was no Google back in the early 1970's , the WAS a less interfered with press )

( BTW i use alternative search engines , for a different view of the internet , but sadly several are now piggy-backing on Google )

 

[qldfrog]

Turkey CB independent. What are you smoking ?? Eradogan controls the CB and just reduced IR. His personal thesis is that he does not believe increasing IR will reduce inflation. I’ll find the reference for you sometime. I believe he has changed/removed some CB officials recently because he did not agree with their strategies.

Independent from the US control was my reading and yes you are right about Turkey, i started a thread about the economy there.not many seem interested while India seems to get the popularity support.
Turkey is feeding on the silverware of Europe so i expect better medium term outcome

 

[Garpal Gumnut]

This is all very, very, very complicated.

I could work it all out, and good on everyone for posting, but it's a bit like the weather. "The Bureau", or BOM as I call it, is similar witchcraft and if I had enough decades left in my life I'd look in to understanding weather as well as interest rates.

Again, good on all ASF members for posting.

I'll just return to looking out the window on The Fed and "The Bureau" to work out where to park my money, stocks and Gold next month, and also whether to bring an umbrella out when I visit my Australia Post locker for any Cohibas from Cuba.

gg

 

[Value Collector]

OK, I have made an error.
I should have said that before any money is paid to treasury, a 6% dividend is paid to the member banks who own stock in the Federal reserve, assuming the Fed reserve makes a profit. ( according to Bloombergs it is currently running at an operational loss for the first time in its history ).
From Section 7 of fed reserve act
(a) Dividends And Surplus Funds Of Reserve Banks.

1. Stockholder Dividends.
   1. Dividend Amount. After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders of the bank shall be entitled to receive an annual dividend on paid-in capital stock of--
      1. in the case of a stockholder with total consolidated assets of more than $10,000,000,000, the smaller of--
         1. the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of such dividend; and
         2. 6 percent; and
      2. in the case of a stockholder with total consolidated assets of $10,000,000,000 or less, 6 percent.
   2. Dividend Cumulative. The entitlement to dividends under subparagraph (A) shall be cumulative.
   3. Inflation Adjustment. The Board of Governors of the Federal Reserve System shall annually adjust the dollar amounts of total consolidated assets specified under subparagraph (A) to reflect the change in the Gross Domestic Product Price Index, published by the Bureau of Economic Analysis.

and just to add icing on the cake the very last sentence from the same section

So the dividends are paid before the treasury gets a slice.
Mick

Yes, so that is more like interest earned on long term funds they deposit into the federal reserve, not earnings from the operations of the fed.

From that 6% interest the earn they have to pay their long term depositors and capital notes, so it’s not all profit for the bank, because those notes cost nearly 6%

Then ofcourse any profit the bank does make is taxable, so generates further income for the government

 

[mullokintyre]

This is all very, very, very complicated.

I could work it all out, and good on everyone for posting, but it's a bit like the weather. "The Bureau", or BOM as I call it, is similar witchcraft and if I had enough decades left in my life I'd look in to understanding weather as well as interest rates.

Again, good on all ASF members for posting.

I'll just return to looking out the window on The Fed and "The Bureau" to work out where to park my money, stocks and Gold next month, and also whether to bring an umbrella out when I visit my Australia Post locker for any Cohibas from Cuba.

gg

GG, I am more than happy to look after your money for you.
For a small fee of course.
mick

 

[mullokintyre]

Yes, so that is more like interest earned on long term funds they deposit into the federal reserve, not earnings from the operations of the fed.

Really? And where do you think that interest paid comes from, if not its operations?

From that 6% interest the earn they have to pay their long term depositors and capital notes, so it’s not all profit for the bank, because those notes cost nearly 6%

What do you mean they cost nearly 6%? Cost for whom?
When theymember banks deposit the 6% of capital to be allowed to operate, they only pay half the 6% up front , the other half is at call ( see Richmond Fed membership .

Then ofcourse any profit the bank does make is taxable, so generates further income for the government

Which bank are you referring to when you say its Taxable.
As I showed in the post of the article 7 reg s, (see Section 7 of fed reserve act ) , it distinctly states these dividends are Tax free.
Mick

 

[divs4ever]

Independent from the US control was my reading and yes you are right about Turkey, i started a thread about the economy there.not many seem interested while India seems to get the popularity support.
Turkey is feeding on the silverware of Europe so i expect better medium term outcome

no matter how many times Turkey exasperates me , i realize the current leader is a Nationalist ( thinks of HIS country first ) and i respect him for that

Europe needs Turkey as a buffer for immigration from the Middle-East wars that NATO created , so Turkey extracts a fair price for services provided

 

[qldfrog]

no matter how many times Turkey exasperates me , i realize the current leader is a Nationalist ( thinks of HIS country first ) and i respect him for that

Europe needs Turkey as a buffer for immigration from the Middle-East wars that NATO created , so Turkey extracts a fair price for services provided

Note there is no lost love for Turkey from me either but the way this country/ leader tricks the West again and again,rolling them in their own incompetency and narrative...
Can only admire ....and cry, again and again for the West ...

 

[divs4ever]

Note there is no lost love for Turkey from me either but the way this country/ leader tricks the West again and again,rolling them in their own incompetency and narrative...
Can only admire ....and cry, again and again for the West ...

i am guessing he exasperates Russia and China as well , but i suspect they understand what motivates him

the West will have to cure itself , or plunge into an unhappy state ( for most )

my subtle barbs to high school teachers didn't work , suggestions to several corporations ( as a share-holder or employee ) didn't work , so here we are

( hope you stacked up on the popcorn , firewood and generator fuel )

 

[Gunnerguy]

This podcast might be of interest to people. I have listened to ‘Planet Money’ and ‘The Indicator’ weekly for over 10 years. Lots of interesting simply, none conspiracy, econ topics. Highly recommended

 

[Value Collector]

Really? And where do you think that interest paid comes from, if not its operations?

What do you mean they cost nearly 6%? Cost for whom?
When theymember banks deposit the 6% of capital to be allowed to operate, they only pay half the 6% up front , the other half is at call ( see Richmond Fed membership .

Which bank are you referring to when you say its Taxable.
As I showed in the post of the article 7 reg s, (see Section 7 of fed reserve act ) , it distinctly states these dividends are Tax free.
Mick

Ok, so you are still a bit confused about how this all works and who the member banks are and what they do.

The 12 member banks are not actually commercial banks, they themselves basically operate as mini reserve banks for their region of the country, and have many duties to carry out and incur running cost.

The of costs of running these operations are large, they range from operating clearing houses to process cheques, replacing worn out currency, processing inter bank payments, conducting research, supervising banks and credit unions etc etc

So that 6% interest rate isn’t going as profit to anyone it’s largely consumed as running costs or added to the capital reserve or paid to the deposit holders of the commercial banks, credit unions etc that make deposits with the regional member banks.

As I mentioned before, even if some of it does make it back down to the commercial banks, they then pass it on to their depositors or shareholders who are subject to taxation.

 

[mullokintyre]

Ok, so you are still a bit confused about how this all works and who the member banks are and what they do.

The 12 member banks are not actually commercial banks, they themselves basically operate as mini reserve banks for their region of the country, and have many duties to carry out and incur running cost.

The of costs of running these operations are large, they range from operating clearing houses to process cheques, replacing worn out currency, processing inter bank payments, conducting research, supervising banks and credit unions etc etc

So that 6% interest rate isn’t going as profit to anyone it’s largely consumed as running costs or added to the capital reserve or paid to the deposit holders of the commercial banks, credit unions etc that make deposits with the regional member banks.

As I mentioned before, even if some of it does make it back down to the commercial banks, they then pass it on to their depositors or shareholders who are subject to taxation.

I don't know where you get your information from , but once again, I will quite the federal reserve regulations.
The Fed Appendix B

To: Federal Reserve Board
From: Mr. Walter S. Logan, General Counsel
Subject: Payment of dividends of Federal Reserve Banks out of surplus
Date: April 11, 1922

You have requested my opinion upon the question of whether a Federal reserve bank, which has accumulated a surplus fund out of earnings of past years, has authority to use a part of this fund to pay to its stockholding member banks the dividend for a subsequent year during which the current earnings of the federal reserve banks are insufficient to pay such dividend.

I am of the opinion that the question should be answered in the affirmative.

The material portions of Section 7 of the Federal Reserve Act read as follows:

"After all necessary expenses of a Federal reserve bank have been paid or provided for, the stockholders shall be entitled to receive an annual dividend of six per centum on the paid-in capital stock, which dividend shall be cumulative. After the aforesaid dividend claims have been fully met, the net earnings shall be paid to the United States as a franchise tax except that the whole of such net earnings, including those for the year ending December thirty-first, nineteen hundred and eighteen, shall be paid into a surplus fund until it shall amount to one hundred per centum or the subscribed capital stock of such bank, and that thereafter ten per centum of such net earnings shall be paid into the surplus.
"…Should a Federal reserve bank be dissolved or go into liquidation, any surplus remaining, after the payment of all debts, dividend requirements as hereinbefore provided, as the par value of the stock, shall be paid to and become the property of the United States and shall be similarly applied."

You did not provide anything to backup your claims that the 12 regional fed reserves have large expenses.
According to This year 2000 fed report in the year 2000,

The aggregate amount of the surplus funds of the Federal reserve banks may not exceed $6,825,000,000.

) 1 Transfer for fiscal year 2000​

(1) In general​

The Federal reserve banks shall transfer from the surplus funds of such banks to the Board of Governors of the Federal Reserve System for transfer to the Secretary of the Treasury for deposit in the general fund of the Treasury, a total amount of $3,752,000,000 in fiscal year 2000.

The maximum the fed could distribute to the member banks in dividends was nearly twice the amount to be distributed to treasury.


As to the tax question, I refer you to the following from New Republic

But if the 6 percent dividend on capital stock isn’t the Fed’s largest gift, it may be the most brazen—a risk-free entitlement program that has operated in obscurity for 100 years. Most member banks don’t even have to pay corporate taxes on the dividends, unlike most Americans who pay anywhere from 15-20 percent in dividend taxes. An update to the law imposed taxes on dividends from Federal Reserve stock to any shares issued after March 28, 1942. But most Wall Street banks have charters with roots back to the 19th century, and are grandfathered in with the tax exemption.

Mick

 

[Value Collector]

I don't know where you get your information from , but once again, I will quite the federal reserve regulations.
The Fed Appendix B

You did not provide anything to backup your claims that the 12 regional fed reserves have large expenses.
According to This year 2000 fed report in the year 2000,

The maximum the fed could distribute to the member banks in dividends was nearly twice the amount to be distributed to treasury.


As to the tax question, I refer you to the following from New Republic

Mick

I think you need to have a look at the actual numbers, for example in the year that the Fed sent $96 Billion to the government, it only paid $1.7 billion in dividends to the member banks. Last year it paid $5.3 Billion in dividends but sent $107 Billion to the government.

Have you had a look at any of the member bank websites? You will see that their responsibilities are quite large, what makes you think they wouldn’t have large operating costs, they probably do more work than the actual Federal reserve itself.

I am not sure you actually have an idea of how they operate, you seem to be attacking your research side ways.

 

[JohnDe]

The Federal Reserve: Myths and Conspiracies — Are They Real or Not? — Tally

The Federal Reserve is the central banking system of the United States. But there are many conspiracies and myths about the Fed. Here’s the truth.

www.meettally.com

 

[mullokintyre]

I think you need to have a look at the actual numbers, for example in the year that the Fed sent $96 Billion to the government, it only paid $1.7 billion in dividends to the member banks. Last year it paid $5.3 Billion in dividends but sent $107 Billion to the government.

Have you had a look at any of the member bank websites? You will see that their responsibilities are quite large, what makes you think they wouldn’t have large operating costs, they probably do more work than the actual Federal reserve itself.

I am not sure you actually have an idea of how they operate, you seem to be attacking your research side ways.

I try to provide the sourse of any figures I put up.
It would be helpful if you could do the same, lest somebody accuse you of pulling them out of your ear.
As for the large operating costs, once again, you provide no supporting evidence other than the word probably.
I have no idea what their operating costs are, but whatever the operating costs are, they still manage to pay out the dividends.

Mick

 

[Value Collector]

I try to provide the sourse of any figures I put up.
It would be helpful if you could do the same, lest somebody accuse you of pulling them out of your ear.
As for the large operating costs, once again, you provide no supporting evidence other than the word probably.
I have no idea what their operating costs are, but whatever the operating costs are, they still manage to pay out the dividends.

Mick

You can find a chart showing the feds distribution to the government each year here.

Federal Reserve Board announces Reserve Bank income and expense data and transfers to the Treasury for 2021

The Federal Reserve Board on Friday announced preliminary financial information indicating that the Reserve Banks had estimated net income of $107.8 billion du

www.federalreserve.gov

I can’t find a chart showing all the federal reserve dividends, but if you spend some time looking they are mentioned in multiple articles such as this one. You can compare them to the other chart against what the federal reserve pays the government each year and you will see that a lot more money goes to the government than does as dividends.

https://www.stlouisfed.org/-/media/project/frbstl/stlouisfed/publications/regional-economist/2015/october/presidents_message.pdf

You don’t seem to understand the basic structure of the federal either, I find some of your assumptions are based on cynicism, eg you seemed to at first to assume that the fed was a private for profit organisation, and then even after you learned that 100% of profits are assumed that it must be the dividends that direct rivers of cash to member banks leaving the government with scraps, but as I have shown that’s not true either.

I tried to explain that the dividends only represent interest on Collateral deposited at the fed, but yeah you seem to have read some cynical/conspiracy theory trash about the Fed and I don’t think I will be able to get you to see past that, so I think I will leave you to it.

 

[mullokintyre]

Firstly, thanks for supplying some sources for your statements.
This discussion was started when you said in post #240

The Federal reserve have Members who must subscribe to stock in the fed reserve by depositing 6% of their capital base, but they don’t receive any profits, those are passed along to the government.

You said right there, that members do not receive any profits, and they are passed to the government.
I pointed out that the dividend on that money goes back to the commercial member banks who put 6% of their capital into the system.
And this dividend gets paid to the member banks regardless of whether the fed reserve makes a profit or not.
In post #242 you reference that same post by saying saying that the members are not ordinary banks.
You confused the members who paid capital into the fed to participate in the banking system with the 12 "members" of the federal reserve system.
You repeated the same statement in pos #246
Then in post #250 you said

Think of it more like a club that costs money to be in, rather than a profit centre, any money the federal reserve does make gets paid to the government, it the shareholders/members.

When I tried to point out again that the commercial member banks who have 6% of their capital invested in the fed reserve gets paid a dividend, you went off a on tangent saying I was into conspiracy theories.
I will admit to making a mistake in post #255 when I said any profit goes to the individual banks, which I acknowledged in post #262.
I think I have said enough on this subject, other than to suggest you take the time to follow the original suggestion I made in my very first post, namely it is instructive to the book by Ed griffin.
Mick

 

[Value Collector]

Firstly, thanks for supplying some sources for your statements.
This discussion was started when you said in post #240


You said right there, that members do not receive any profits, and they are passed to the government.
I pointed out that the dividend on that money goes back to the commercial member banks who put 6% of their capital into the system.
And this dividend gets paid to the member banks regardless of whether the fed reserve makes a profit or not.
In post #242 you reference that same post by saying saying that the members are not ordinary banks.
You confused the members who paid capital into the fed to participate in the banking system with the 12 "members" of the federal reserve system.
You repeated the same statement in pos #246
Then in post #250 you said

When I tried to point out again that the commercial member banks who have 6% of their capital invested in the fed reserve gets paid a dividend, you went off a on tangent saying I was into conspiracy theories.
I will admit to making a mistake in post #255 when I said any profit goes to the individual banks, which I acknowledged in post #262.
I think I have said enough on this subject, other than to suggest you take the time to follow the original suggestion I made in my very first post, namely it is instructive to the book by Ed griffin.
Mick

It’s true that all the “profits” do get passed along to the government, as I have said the dividends that get paid are just interest on their capital which they are forced to store at the reserve, not true “profits”, the actual profits which are about 20 times larger than the dividends/interest get passed along to the government.

————————
Yes I agree we have both been a little sloppy with the term member bank referring sometimes to the 12 reserve banks.

————————
Looking back over the posts I seems that I have attributed some of divs comments to you, this conversation started out with me replying to his cynical comments and it’s seems some where in the middle it switched to you and I talking, so some of the conspiracy theory remarks relate to him.

However, you did still fail to realise that the fed paid its profits to the government, and then once you were shown that you then took the cynical view that the dividends must then be the mechanism that they use to divert large profits to private people, but as I then showed the dividends are small, and are actually interest on deposits not true profits.

I have read a couple of books on fed history, and watched 8 hours of university lectures on it, I am not sure that book could add much, have you read it? Because if it didn’t show you that the profits go to the government I don’t know how good it can be.