Monday, August 3, 2009

So This Is How You Make Huge Trading Profits...

Harry Sender at FT reports:

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage...

A former official of the US Treasury and the Fed said the situation had reached the point that “everyone games them. Their transparency hurts them. Everyone picks their pocket.”
The firms that are in the berst position to take advantage of this istuation are Fed designated "primary dealers." The primary dealers are:


BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Securities America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J. P. Morgan Securities Inc.
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
Nomura Securities International, Inc.
RBC Capital Markets Corporation
RBS Securities Inc.
UBS Securities LLC.

No wonder Bernanke doesn't want an audit. Wouldn't it be nice to see what the Fed is buying, at what price and from whom? How many ways is the Fed shoveling money to Goldman Sachs, JPMorgan Chase, et al.

3 comments:

  1. I hadn't looked at the PD lost in awile. 11 of the 18 PDs are foreign banks. That's quite an assessment of our banking system.

    ReplyDelete
  2. Bring the marshmallows, becuase it will be quite a conflagration. Foreign banks receiving cheaper dollars and then pyramiding on top of those will result in quite a show once the DX hits 74 and lower.

    Hahahaha
    Buy silver

    ReplyDelete
  3. Bring the marshmallows, becuase it will be quite a conflagration. Foreign banks receiving cheaper dollars and then pyramiding on top of those will result in quite a show once the DX hits 74 and lower.

    Hahahaha
    Buy silver

    ReplyDelete