Nestled in Ben Bernanke's Jackson Hole speech was a short quote that might get Republicans' attention: More Fed stimulus could turn a profit for taxpayers. The "odds are strong that the Fed's asset purchases will make money for the taxpayers, reducing the federal deficit and debt," the Federal Reserve chairman said Friday. That point comes as conservative critics have warned that the Fed is buying up too many bonds and amassing a portfolio that will be difficult to unwind in the future.

Bernanke dismissed those concerns. Not only does he have the means to unwind the balance sheet in the future, he agued, but his policies have so far been a moneymaker.

Turning a profit for the Treasury Department is certainly not the Fed's main goal — getting the economy back on track is — but it can't hurt. First, here's an important distinction: When the Fed buys bonds, it's not spending the government's cash. Rather it creates the money itself, basically by electronically crediting the money to banks.

Stimulus (economics) - Wikipedia

The Fed then earns interest on the Treasuries it holds, and while interest rates are very low, the sheer mass of bonds the Fed holds nevertheless makes for quite a windfall. That's up significantly from the pre-crisis years, when the Fed had a much smaller portfolio, with far fewer bonds.

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After paying some of its own administrative expenses, the Fed turns most of those profits over to Treasury, which can use them to pay government bills. Note that the Fed might be holding down the deficit through two other channels: Simply by keeping interest rates low, it makes it cheaper for the U.

Second, if the Fed's policies are working to boost the economy, they are also probably boosting tax revenue for the government. In any case, he says, it's of little consequence whether the Fed gains or loses money in any given year. Annalyn Kurtz is a senior writer at CNNMoney, where she covers America's jobs crisis, Federal Reserve policy and other economic news.

Before joining the site in , she served as a Rotary Ambassadorial Scholar in Prague and interned at Fortune Small Business magazine. Economy Now Instant reaction and smart charts on economic trends. How Fed stimulus earns a profit for taxpayers By Annalyn Kurtz September 1, So how exactly is the Fed making taxpayers money? What makes a great employee? What makes a rotten one? America's most unequal cities. Do you plan to quit Facebook?

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