US banking question

Raharu Haruha said: "i want to figure this out, and it's getting late... and i still have homework lol, so i'm just going to ask on here! When the fed lends money to banks, how do they get paid back? i know there is an interest rate and that they charge more than that interest rate when you're getting a home, but how is the loan that was made by the actual bank paid for? for example, let's say that citi bank loans 1,000,000 from the fed at 5%, do they need to pay back 1,020,00 flat out, basically over how long of a period of time? actually, as i'm writing this i'm assuming that it's paid off as the loan is paid off. the other question i had was what the fed actually does with the money that they earn off of interest."

AlfredSokol said: "Its whatever terms they get. But you have the basic idea. They get money through the "discount window" at one rate and lend it out a higher one."

Raharu Haruha said: "[QUOTE=AlfredSokol;61440]Its whatever terms they get. But you have the basic idea. They get money through the "discount window" at one rate and lend it out a higher one.[/QUOTE]and that's why the fed is worried about inflation, right?"

marketnewbie said: "The fed doesn't make money. It's a govenment agency, well not technically, but they have no profits/losses."