Archive for the ‘Bailout’ Category

Primary Dealers and Profligate Deliveries…

January 21, 2010

Robert Wenzel on the secret bank bailout:

There’s one method that the Federal Reserve has been employing to shovel money to the bank elite that is rarely mentioned, though I hear the sums that have been shoveled are in the billions and they are showing up on the books of firms like Goldman Sachs as pure profit. It’s really pure scam.

Here’s what went on for months, according to traders familiar with the situation.

When the Federal Reserve buys and sells Treasury securities it does so through primary dealers. Goldman Sachs and JPMorgan are among the select elite firms that, naturally, got into this club.

So when the Fed wants to trade it goes to one of these primary dealers. In the past, to earn a profit, the banks would execute the trade and mark up the price a bit on a buy to the Fed (or mark down a bit to the Fed when they were selling for the Fed ). Since Fed traders have screens showing them where market prices are, in the past primary dealers were allowed small mark ups and mark downs in line with what banks were marking up and down for their other clients. It would be difficult for a primary dealer to get away with an outrageous mark up or down because the Fed trader would have a pretty good idea of where a trade should have been made.

Once the Fed and Treasury started shoveling money in every possible way they could think of to the elite banks, the word came down to Fed traders to “ease up” on the mark ups and down. Let the banks take a “healthy” mark up and mark down, they were told. I’m advised that the “healthy” mark ups and mark downs have resulted in the Fed overpaying on their trades with primary dealers to the tune of billions. These billions are looking like profitable skilled trades, when they are nothing of the kind. They are hidden gifts from the Federal Reserve that are generally unseen, unknown and will never be paid back… (more…)

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An Economic Ray of Light?

January 14, 2010

…Only for those who caused the financial meltdown in the first place…

Jon Stewart on Henry Paulson, Tim Geithner and the bailouts:

Clusterf#@k to the Poor House