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Ratio Of Fed Allegiance Between Primary Dealers And Taxpayers: 4:1

Tyler Durden's picture


Earlier we said: "In advance of the completion of today's POMO we have just one question: will the Fed do its taxpayer fiduciary duty and
monetize the cheapest bond (PM6 or the 2.125% of 12/31/2015), which
trades 0.7 bps cheap to the sector, or, instead, bend over to Jamie
Dimon et al again and instead buy the bond most profitable to flip by the Primary Dealers the just issued QJ2 (2.125% of 2/29/2016), which is actually 0.2 bps rich. Tune in at 11 am to find out." The results are in. As expected, the two bonds monetized the most by the Fed in today's $6.7 billion POMO are QJ2 to the mount of $4,891,000,000 and PM6 for $1,196,000,000. In other words, the Fed's "fiduciary" allegience is to the Primary Dealers over taxpayers in a ratio of 4 to 1. Thank you Sack-Frost for making it all too clear who you really work for.

Full results. Note the highlighted purchases.



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Wed, 03/02/2011 - 13:04 | Link to Comment EscapeKey
EscapeKey's picture

I would be outraged, if this was in any way surprising.

Wed, 03/02/2011 - 16:15 | Link to Comment strannick
strannick's picture

Great research TD. What might otherwise pass unnoticed minuatae on a daily trading printout, TD drags it before the light of day and shows it for what it is, fascistic capitulation of the government.

Wed, 03/02/2011 - 13:05 | Link to Comment FOC 1183
FOC 1183's picture

the market (at least intraday) peaked on the report (high SA)

Wed, 03/02/2011 - 13:05 | Link to Comment SpeakerFTD
SpeakerFTD's picture

Is treason too strong a word?

Wed, 03/02/2011 - 13:32 | Link to Comment MarketTruth
MarketTruth's picture

Hey!!! Bernanke!!!


........('(...´...´.... ¯~/'...')
..........''...\.......... _.·´
Wed, 03/02/2011 - 13:10 | Link to Comment Muir
Muir's picture

What just happened to the 10Y T?

Wed, 03/02/2011 - 13:23 | Link to Comment Orly
Orly's picture

Gates sez they're gonna bomb Lybia.


Wed, 03/02/2011 - 15:32 | Link to Comment dark pools of soros
dark pools of soros's picture

during a civil war do the bombs know how to pick sides??

Wed, 03/02/2011 - 13:11 | Link to Comment John McCloy
John McCloy's picture

   This should be mainstream news and not Lilo and Sheen. Anyone have the courage aside from ZH to point out the endless sodomy? 

Wed, 03/02/2011 - 14:17 | Link to Comment PeterSchump
PeterSchump's picture

Yes, the folks at MSNBC and Fox News are on it.  Piers Morgan will cover it in one of his brilliant interviews on CNN as well.  Did you miss it?

Wed, 03/02/2011 - 13:12 | Link to Comment InconvenientCou...
InconvenientCounterParty's picture

I take this personally.

Wed, 03/02/2011 - 13:15 | Link to Comment buzzsaw99
buzzsaw99's picture

That really frosts my sack.

Wed, 03/02/2011 - 13:26 | Link to Comment billhilly
billhilly's picture

DAMN, you are one funny buzzsaw!

Wed, 03/02/2011 - 16:14 | Link to Comment strannick
strannick's picture

they should sack frost for frosting Buzz' sack

Wed, 03/02/2011 - 13:16 | Link to Comment Greater Fool
Greater Fool's picture

Their allegiance is to themselves and their own policy flexibility: They need to keep on-the-run yields as low as possible in the 2-7 year range to make it look like the market is pricing in less inflation / sovereign credit risk on those time horizons.

Wed, 03/02/2011 - 13:17 | Link to Comment Larry Darrell
Larry Darrell's picture

Is there not even ONE congress critter at today's hearing that could ask Bernake what's going on here?


Send this article to every congress critter at that meeting.

Wed, 03/02/2011 - 13:44 | Link to Comment janchup
janchup's picture

Being permanently on the take does not confer intelligence.

Wed, 03/02/2011 - 13:21 | Link to Comment buzzsaw99
buzzsaw99's picture

from bloomberg:

Federal Reserve Chairman Ben S. Bernanke didn’t rule out expanding the central bank’s asset purchases aimed at stimulating the economy, saying he doesn’t want to see the economy relapse into recession.

Asked at a House Financial Services Committee hearing today what conditions would warrant a third round of so-called quantitative easing, Bernanke said that “what we’d like to see is a sustainable recovery. We don’t want to see the economy falling back into a double dip or to a stall-out.”

Wed, 03/02/2011 - 13:22 | Link to Comment Atomizer
Atomizer's picture

Nice job Tyler!

Wed, 03/02/2011 - 13:24 | Link to Comment billhilly
billhilly's picture

All I can say is that I hope and pray that somehow Ron Paul, or someone with the power to bring this issue to light, will do so.  Maybe we could/should somehow begin a "list of questions/facts" that can be presented to RP for him to use during one of these hearings.

God I hope he reads ZH!

Wed, 03/02/2011 - 13:41 | Link to Comment janchup
janchup's picture

Hoping and praying are useless at this point.

Wed, 03/02/2011 - 13:51 | Link to Comment SpeakerFTD
SpeakerFTD's picture

He got all of five minutes today.  Then his time was up.

He was followed by Maxine Waters.  That's all you need to know about the state of the Congress.

Wed, 03/02/2011 - 15:24 | Link to Comment Zero Govt
Zero Govt's picture

how does Bernank expect a "sustainable recovery" when he's propped up the Big Bad Bwankers and literally grown them from 50% to 70% of the banking sector???

If he wants a recovery at all he needs to let the shit bankers go bankrupt and new kids on the block to emerge. Bernanks personal screening seems to be all about hiring incompetents and frauds and slapping new talent in the face to keep the old guard eating cake   

the chubby midget crone is a banking sector tool for ratcheting up the crap and snuffing out real change and new talent (ie. a real recovery) ...the ultimate rotten old fart with totally impaired judgement creating an even bigger mess in banking

Wed, 03/02/2011 - 15:33 | Link to Comment dark pools of soros
dark pools of soros's picture

is BAC still charging dem fees??!?!?!?!?!

Wed, 03/02/2011 - 20:17 | Link to Comment ehildret
ehildret's picture

Don't waste your time with the current crop of crooked congress people (CCCP).  RP exception.

Wed, 03/02/2011 - 13:26 | Link to Comment Shameful
Shameful's picture

Well one way to look at it is glass is 1/5 full.  Take it as a gift that it's not totally's not like there is a complaints department.

Wed, 03/02/2011 - 13:31 | Link to Comment Rikki-Tikki-Tavi
Rikki-Tikki-Tavi's picture

Isn't this just illustrating that the treasury auctions really have limited demand and would likely fail without the PD's? Not being willing to admit reality most have a price.

Wed, 03/02/2011 - 13:37 | Link to Comment partimer1
partimer1's picture

Fed is working for the banks, not for the people.  Inflation and zero interest rate hurt poor people a hell lot more than the riches.  That's what the Fed is doing, to rob the poor and give to the rich.  deflation is good for the poor, but bad for the rich, since the rich is severely leveraged. That cannot happen. 

Wed, 03/02/2011 - 13:39 | Link to Comment janchup
janchup's picture

Anyone who thinks the Fed gives a shit about taxpayers, Grandma (the old lady under the bus) or savers needs more medication to combat their delusion.

Wed, 03/02/2011 - 13:48 | Link to Comment Contra_Man
Contra_Man's picture

Kudos... and dammit ZH - seems you're always finding its worth it to dig just that much deeper than the next talking head... as every stone bothered to be turned over uncovers more "non-litigious" facts and stories of abandoned fiduciary duties of the Fedsury, Congress, Admins et al. 

FYI  I'll be sure to bring this matter up at the next public Board of Directors meeting.

Wed, 03/02/2011 - 13:46 | Link to Comment plocequ1
plocequ1's picture

Yes, We know we are screwed. Who cares. I have bigger issues. The Apple store is down. Oh the humanity.

Wed, 03/02/2011 - 13:45 | Link to Comment buzzsaw99
buzzsaw99's picture

Switching printing press to ludicrous speed.

Wed, 03/02/2011 - 13:48 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Save a cow.... Eat a "Fat Fucking Bankster"

Ps...Remove Gold coins from pockets first for easier digestion.

Wed, 03/02/2011 - 13:49 | Link to Comment Bob
Bob's picture

Great catch, Tyler!

Wed, 03/02/2011 - 13:56 | Link to Comment AccreditedEYE
AccreditedEYE's picture

When you have a massive balance sheet hole to fill, I guess every little bit helps... lol

Wed, 03/02/2011 - 13:58 | Link to Comment DB Cooper
DB Cooper's picture

Thank you Tyler!  I have taken to bombarding my representative with question after question like this.  I know it probably won't help but I feel better.

Wed, 03/02/2011 - 14:00 | Link to Comment Rule of 72
Rule of 72's picture

Excellent post, TD.  This is why I come to ZH.  Proof of the Fed's allegiances.  Not that I had any doubt it was to the banksters over taxpayers, just nice to see it expressed as a ratio.

Wed, 03/02/2011 - 14:01 | Link to Comment gordengeko
gordengeko's picture

Nothing to see here.  What time is Jersey Shore on?

Wed, 03/02/2011 - 14:04 | Link to Comment NotApplicable
NotApplicable's picture

Are they in Italy yet?

I can't wait until they meet the Pope. Should be quite a hoot!

Wed, 03/02/2011 - 14:01 | Link to Comment andy55
andy55's picture

p.p1 {margin: 0.0px 0.0px 0.0px 0.0px; font: 9.0px Monaco}

finance-to-english translation: the banks are on the final/terminal leg of the looting


Wed, 03/02/2011 - 14:01 | Link to Comment AldoHux_IV
AldoHux_IV's picture

That fucking liar Bernanke just told some idiot in the house that the fed actually used a study to best determine the amount of QE needed i.e. destroying the US federal reserve note, when it's the banking masters of this country that determined how much they needed to feel they could speculate with and make some profits that would be worthy of the lifestyle they've become accustomed to.  These fuckers need to be thrown in pound-me-in-the-ass jail!

Wed, 03/02/2011 - 14:03 | Link to Comment NotApplicable
NotApplicable's picture

Our Fed Allegiance, is to the gang,

destroying the United States of America.

And to the public, well, you are damned:

to starvation, with invisible liberty and injustice for all.

Wed, 03/02/2011 - 14:19 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

Maybe CNBC will have this on tonight after reading zero hedge today. Thanks Tyler,you da man

Wed, 03/02/2011 - 14:32 | Link to Comment asteroids
asteroids's picture

Why surprised. The FED is doing the best for its shareholders.

Wed, 03/02/2011 - 14:56 | Link to Comment Bastiat
Bastiat's picture

Elegant, Tyler (in the scientific sense of the word).

'(of scientific, technical, or mathematical theories, solutions, etc.) gracefully concise and simple; admirably succinct. "


Wed, 03/02/2011 - 15:18 | Link to Comment ThirdCoastSurfer
ThirdCoastSurfer's picture

Without force majeure there is no incentive for the PM"s to sell at a 7bps discount while there is little reason not to sell at a 2 bps profit. Funny thing though, the inverse of this equation would seem to indicate that the PM's are selling most of the comparatively profitable issues and holding an ever higher proportion of the dogs. After all, once QE ends (June?)  it will be these same PM's that will be called upon to buy these refried issuances, presumably at 7+ bps discount.  

There must be models that adjust the PM's holding mix of issuances to account for and attempt to maximize the outcome which is where the real expense to the taxpayer resides but outside of a standard deviation of inflationary pressures in an environment where the Treasury and everyone else will also need to continue issuances one has to wonder how it will not all just collapse in on itself.

Thu, 03/03/2011 - 01:27 | Link to Comment agrotera
agrotera's picture

4:0, rather is infinity to 1 for all intents and purposes.


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