The Fed has bailed out the economy with "QE1,2,3,..." along with many other bailouts.
They stabilized the banking system, the housing market, and the bond market, the equity market and many individual companies (GE, Fannie and Freddie, etc) that were "too big to fail".
My question is, now that the Fed plans to "sell" these investments, what happens to these profits that were realized by Fed?
Who will be the buyer as they "flood the market'?
Does the Fed pay taxes on capital gains, like an individual or a corporation? If yes, I could imagine this would be the largest tax payment in US history.
Warren Buffet bailed out some companies with warrants. What is the obligation of repayment to the Fed for their private/public bailouts?
If they bought stocks and bonds outright, will they be forced to sell? If the Fed is capable of orchestrating a bull market are they also capable of any other scenarios; recession, bear market, fat tail, etc?
We live in a time of Central bank risks, but what are these risks? Bruce Berkowitz (Fairholme Fund ownership on Fannie and Freddie) found out the hard way that the government can change the rules to their liking harming his investment.
Is this a worry for others?
A few articles:
what-happens-when-fed-starts-losing-money-other-side-qethe-insanely-profitable-federal-reserve
Comments
http://www.nytimes.com/2012/01/11/business/economy/fed-returns-77-billion-in-profits-to-treasury.html