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OpEd: 'Creative Accounting' at the Federal Reserve?

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As the story goes, the Federal Reserve "made" $91 billion dollars last year, sending $89 billion of that to the U.S. Treasury. Until 2008, about the only earning assets the Fed owned were U.S. Treasury bonds.

Let's stick with that for the moment.

The interest the Fed earns on those bonds is paid by the U.S. Treasury! The Fed keeps 1 percent of the earnings to pay its rent and sends the rest back to the Treasury. So every dollar the Treasury pays to the Fed is returned, less a 1 cent handling cost. So the interest cost the Treasury incurs is magically turned into Treasury income!

(Read More: Fed Keeps Stimulus Amid Signs of Weak Economy)

So how much do you want the Fed to make?

There is no limit in principle to the amount of Treasury debt the Fed can buy so it can makes lots of money!! The Fed has increased its assets by over $2 trillion since 2007, a real money-maker!

Yes, the Fed has also purchased a lot of mortgage backed securities, but those have a Treasury guarantee, so same deal, in terms of who bears the risk, but of course mortgage holders are paying the interest and giving it to the Treasury (that lent them the money in the end).

(Read More: New Hawks and Doves at Fed Likely Won't Alter Policy)

Some worry about the "capital" the Fed holds. An institution that can "print" capital will never run short. The Wall Street Journal worries that when market interest rates rise, the Fed will lose money on the bonds it now holds.

Really?

As long as the Fed can print money and buy Treasury assets (bonds or guaranteed securities), it gets revenue. It's an accounting game over which there is too much hand-wringing.

(Read More: Fed Virtually Funding the Entire US Deficit: Lindsey.)

Although the Fed is "independent," it has chosen to do its work using "riskless, sovereign assets". Well, we know all about that now. Budget-makers can easily deal with this reality. It's a money printing scheme, the government debt is converted to cash and injected into the economy. The Fed could just as easily give the money directly to the Treasury and skip the "debt" step. What's the difference between $1000 in cash and a one year $1000 Treasury bond? 365 days and some change, very small change these days.

The Fed's job is not to make a profit. It is a policy maker. It's a tough job, let's not saddle it with the responsibility of delivering a $100 billion of pretend revenue to the Treasury.

(Read More: Markets Will Punish Central Banks: Marc Faber)

William Dunkelberg is an Economic Strategist, Boenning & Scattergood and Chief Economist, National Federation of Independent Business and an Economics Professor, Temple University.