Printing money

The treasury prints money and loans it to the Fed at zero interest. The Fed uses the money to purchase mortgage backed securities from Fanny Mae and then collects the interest they earn on these securities. This allows the Fed to make a profit and then they pay back the treasury with principal and interest and this year that came to 80 billion in profits. A take-off on this procedure has helped AIG get out of debt as they now advertise on TV that they have paid off their government loans. Recall that the investment banks that purchased the junk bond called mortgage backed securities covered themselves by purchasing an insurance policy from AIG which transferred the risk to AIG. Since these bonds turned to junk, AIG was facing bankruptcy. The government intervened and purchased 92% of the company. This gave AIG time to restructure and come up with a plan to buy back its stock from the government. They completed this and now are bragging on TV commercials about it. The government bought the stock with free money like they bought securities from Fanny Mae. After AIG got back on their feet they used the government money to buy back their stock. While the government was holding this stock they made a profit of several billion. There is a story within the story here worth mentioning. Gold Sachs received some of the AIG bailout money to supposedly pay off their investors but about 3 billion went directly to Goldman and this was not legal. Recall the Hank Paulson treasury secretary who came up with the bailout plan was the former CEO of Goldman. Goldman was the same company who made up a mortgage backed security account filled with losers and sold these to foreign banks totting them as winners. While they were doing this they sold short on this same securities and made 500 million when these securities went south. This coalition of bank and fed is just one more example of the corruption that is so prevalent.