Seems the corporate profits report includes the Fed’s profits, all of which get turned over to the Treasury, of course…

How the Fed Stopped the “Corporate Profit Recession” (and the Media Fell for it)

By Wolf Tichter

The end of the corporate “profit recession” has been declared last week. It was based on data by the Bureau of Economic Analysis, released on May 27. Corporate profits, after declining with some zigs and zags since their peak in the third quarter 2014, suddenly ticked up in the first quarter 2016. And everyone was ecstatic.

But there’s a detail – a huge detail – that the media conveniently forgot to point out: whose profits are included in “corporate profits.” The BEA tells us (emphasis added):

These organizations consist of all entities required to file federal corporate tax returns, including mutual financial institutions and cooperatives subject to federal income tax; nonprofit organizations that primarily serve business; Federal Reserve banks; and federally sponsored credit agencies.

For the first quarter, the Federal Reserve Banks reported a consolidated profit that had jumped 11% from a year earlier to a record $24.9 billion!

And this magic profit was added to the BEA’s measure of “corporate profits.” Total corporate profits ticked up $8.1 billion in the first quarter, including the Fed’s magic $24.9 billion. And without the Fed’s magic profits?

So somewhat embarrassingly for the gurus of the end of the corporate profit recession: “Were it not for this increase, overall profits in the US would have actually been down for a third consecutive quarter.”

In fact, on an annualized basis, the Fed’s magic profits accounted for 27.2% of US financial sector profits and for 5.3% of total US corporate profits (blue line in the chart below), “the highest level in a generation.”