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Today's POMO Confirms Fed Continues To Shower Primary Dealers With Billions In Commission-Based Profits
While commenting on yesterday's NYT joke of a profile of the New York Fed POMO group, we openly mocked the claim by one Mr. Frost who said that when monetizing debt "We are looking to get the best price we can for the taxpayer.” We politely suggested that this is a blatant, tendentious lie, and that in fact the New York Fed merely cares to gift the Primary Dealers with any price it can for their bonds just so it stays on their good side (think Primary Dealer Auction take down over 50%), and after all - it is only money that according to Steve Liesman appears out of thin air. Earlier today, we suggested a simple experiment that would confirm whether or not this is the case: specifically, if any of the monetized bonds by the Fed ended up being on the part of the curve seen as rich to the spline, it would immediately become obvious that PDs, instead of monetizing the "cheap to sector" bonds, or those on which the PDs are making a capital gains profit, are making up for capital losses through side arrangements with the Fed, specifically in the form of wide bid/ask spreads resulting in taxpayer funded commission gifting. Sure enough, this is exactly what has transpired.
As the chart below shows, while the 10 bonds suggested to be monetized were all in fact tendered, leading to a hit rate of 100%, the notional represented by this sample which was all "cheap to sector" was just 70% of the total. Of the balance, a whopping 78% (or 23.5% of the total) was accounted for by CUSIPs which were rich to the sector, meaning the PDs were at a relative disadvantage when submitting these for Fed buybacks, and likely ended up losing money on the transaction.
What made up for this P&L mismatch and incentivized the PDs to sell to the Fed at a capital loss? Why cumulative commissions of course. Which means that it is now up to those few uncorrupt congressional critters to immediately submit a letter to Messrs Frost, Sack and, of course, Goldman liaison Bill Dudley (not forgeting to cc: the Chairman himself) and demand to find out just what is the fuzzy logic in the algorithm used by the 20 year olds NYU student at the FRBNY POMO desk, and just how much in taxpayer funds does each and every POMO transaction gift to the 18 Primary Dealers, whose bonuses per banker, as far as we understand, will be the second highest in history for 2009. Surely we can commiserate with the Fed's desire to create a wealth effect at such impoverished institutions as Goldman Sachs and fund billions in commissions directly to the govvie traders, but doing so at the expense of more billions in bond issuance which will never be repaid anyway, is something that we believe is time for Congress to have some say on.
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Is profit position when Bernanke is on his hands and knees?
Platinum and oil have broken resistence and gold and silver are testing theirs. If gold and silver break today after the other two. We will move to all the upsides at once, and what spectacular fashion that would be! $1800, $92, $31, and $1420. Let us wait and see, but if that happens the next leg should start promptly. Also, the dollar is capitulating in its 10 year average DXY 81. We have tested and not broken the utmost important 81.5. If the dollar can not break that soon, POMO will continue to murder the dollar, and DXY will move south hard and fast. Finance is at its crux, maybe the time is now for a big break....
Nothing to see here, folks.
Just The Federal Reserve preparing for harvest time, through the deflationary-inflationary, boom-bust cycles it and other private central banks, modeled on the London Central Bank, so love to occassionally sew.
How else would they liberate so many of so much of their stored/saved assets, wealth and other 'things' they're desirous of, from land to PMs to fine art?
There is a fire sale going on, and if you're not on the inside, you'll see your assets up on the auction block being sold to the voracious, rapacious parasites.
Isn't this the same kind of Ponzi as TSTC, CGA and DYP. Phony accounting and manipulation. The only difference is this ponzi owns a printing press. We all know how valuable that is for ????????????
Goldman showers for them, Golden showers for us
'Taxpayer funded gifts'? What taxpayer?
+2
Awesome.
I definitely have to pay taxes, but thanks to Unkie Samuel, I have less taken from each paycheck for SSI this year... not sure how that factors into sustainability, but I've got to figure collapse the POS sooner.
And, of course, I'm sure they'll take it out of my ass elsewhere.
Over 3 years since the American people were screaming about TARP
Still nothing... NO shoes have dropped.
Shouldn't we be greatful???
Sorry, which shoe hasn't dropped yet, exactly? We've got nations collapsing left and right. 80+% of states are insolvent, US equities and bond markets are controlled from Washington, commodities are exploding in price, food riots are starting around the world.
Ostrich syndrome is what you have.
Look at the dollar in 2005. How is it after 14 trillion in backstops, QE-1,QE-2, Swap lines ...... January 11, 2011 (USD 81.17)
When is this " great crash " going to finally materialize ? All the new dollars/treasuries .... WTF ?
Everyone and their mother has been saying for years that the USDX is an utterly worthless indicator of dollar strength. All it means is that all the currencies are falling at the same rate. All currencies are falling like rocks against gold, the only real money. "But it's a bubble," you say. That's just plain stupid. Gold makes up less than 1% of world financial assets. Prior to 1980, the average was somewhere around 25%. The amount of gold held by the US was more than enough to cover all outstanding dollars in 1980. Prices would have to rise for $55,000 an oz for that to be the case today, ASSUMING they still have the gold.
I can imagine you making this same comment in 1932. The "great crash" already happened! That was 2008 this time. Now we are in a depression.
"Everyone and their mother has been saying for years that the USDX is an utterly worthless indicator of dollar strength."
Who, you .... ??? ... Lol' Link ??? The dollar index in the forex market is broken, the reserve currency ... Bwahaaaheee whew ...good one - { knee slap } Trillions in that market Tmosley, trillions ....
"ASSUMING they still have the gold."
All the swap lines over the last 3 years. Everyone needs dollars to service dollar denominated debt in the host banking system,... Ben has been collecting more gold on the cheap !!! ECB you need dollars, give me the rest of your gold ! Lol' Ben is in total control of this game.
LOL'
Did taxpayers approve of this?
No, of course not. This is why this is done this way. The Fed is "out of reach." And, not surprisingly, out of control.
Nothing's out of reach, if only you have a little confidence - as these guys (and girls) seem to:
www.reallifesuperheroes.org/
Too bad none are devoted to being the Bernake's arch-nemesis.
Depends on how you define tax payer. These guys will pay taxes on their commissions, right?
I am not a Taxpayer.... I am Elmer J Fudd, Millionaire. I own a Mansion and a Yacht. I am Elmer J Fudd, Millionaire. I own a Mansion and a Yacht. I am Elmer J Fudd, Millionaire. I own a Mansion and a Yacht.
Gift taxes...
F'n poetry! Spot on the spot! The mystery of the current situation. I understand that, because of the shooting in AZ, congress stood down in terms of conducting business. Odd. Infuriating, actually. As maddening as the Rs agreeing to add an additional $800 billion in spending to extend Bush tax cuts for two years.
Now, I am not the brightest bulb on the tree myself, but here is the confounding thing...even I can see how dysfunctional EVERYTHING ON THE SURFACE OF THE EARTH IS. I also know that the Tea Party came in to being to STOP THE MADNESS!
Question? Why hasn't Ron Paul announced his torture rack schedule for B. Bernanke? Seriously, what will it take to move one incompetent congressman, or cause one criminal syndicate Wall Street banker to even pause momentarily on his crime spree?
In other words......
WHAT THE FUCK IS GOING ON AROUND HERE! ?
How da' shorts looking ...?
What banks are you shorting, names ?
No one is shorting anything, just like no-one shorted the Zimbabwe stock market, even as their economy floundered into hellhole status.
Learn the difference between real and nominal gains. Then you can talk with the grown ups.
Ummmm....I am shorting...quite a few things...tmosely.
Aster-maye of the lythe-baye plus the largest makers of both zombies and petroshrimp...with a dash of $9+ burritos...to name a few.
And look at the roaches pouring out of the Roach Motel [SPY] in the last few minutes. Not surprising as nothing has ever been so over done than US equities in the last three months. Money now heading back into treasuries despite the oft proported theme that rotation would be forever out of [relative] safety. The tell for the close today is the world's largest zombie maker.
Flash crashes everywhere, bitchez! Let's light this crap candle!
http://s0.ilike.com/play#Bing+Crosby:Pennies+From+Heaven:349267:s16363.2283.8920792.1.1.68%2Cstd_17d032fcebd4b870d008c9f798c3e6bd
That is until the ruling cabal says "No more" and then the bear market resumes.
Watch the career moves of the people involved in this carefully. Quid pro quo.
Would be nice if the ordinary person didn't get showered with golden residues and more the golden stuff the PDs get!
Money is becoming funny. One of the key themes of 2011. It doesn't matter to the Fed that they're giving money away to PDs, it doesn't matter to Japan that it's giving money away to Portugal. After 3 years of non-stop bailouts we've reached desensitization. What's another Trillion? Put on the tab!
And of course this is yet another turn of the biflationary rack that's killing the middle class in favor of the gold-plated corporate elite. And that's in the US and the wealthy countries. In the poorer ones it's setting off food riots, with more to come.
Another day of "Governors Gone Wild". Fed Govenors that is. I am taking my ball and going home, there is no way to win in this crooked, fixed, jacked up market.
The fed buying Ts from the PDs is incestuous and wrong. The PDs are like fifty something years old and still suckling at their ninety year old mother's teat. Disgusting.
Minyanville appears to be taking a stab at Tyler here, even if they try to play it off like they aren't...
http://www.minyanville.com/dailyfeed/bizarre-fact-of-the-day/?camp=syndication&medium=portals&from=yahoo
Those two pics and movies have very little in common.
I seem to remember Louis doing quite well by taking advantage of market corruption to become rich while impoverishing those same manipulators.
Not a bad comparison, really.
It doesn't appear that we're in that part of the movie just yet though unfortunately.
Quid Pro Quo indeed. hand in glove (or cookie jar). The brazen-ness of the open grab is breath-taking.
i'll say this again. There is a buzz about a big, exemplary take-down in wall-street (possibly global bust) in the world of finance. Incidentally, Citi is some serious trouble here in India over a brewing private-sector finance related piece of citi-work.
All of this disclosure is also part of the playbook. Even places like Zh are "fed" (ha!) certain stories, so the meme can build.
Obviously huge marker for a serious shift int he world as we know it.
A heat map of wall-street/global fraud-busts will be helpful.
ORI
http://aadivaahan.wordpress.com/2010/06/14/70/
No mystery why the Feds would give preferential treatment to the 18 PD's: they're all on the same team. These people ARE the power structure, shifting real wealth from many dumb taxpayers to a few smart insiders. And it's not just a case of the Fed appeasing the PD's so they don't bring down the bond market altogether; it's more a case of one hand washing the other. These people all go to the same clubs, dine at the same restaurants, tan on the same beaches. How can anyone pretend that one group is "checking and balancing" the other?
And the looting continues. Got physical silver?
http://www.youtube.com/user/BrotherJohnF
Banker bonuses defended on grounds of "sanctity of contracts" then fraudclosure comes along and nobody can spell it.
+1000
Edit: Whoops... meant to reply above
As regards the "taxpayer funded" costs of these shenanigans, I don't think so. Indeed, the Fed has no authority whatsoever as regards taxes. None. Instead, by gifting the PDs the Fed is debasing the currency. If I am wrong, please correct me. My purpose in seeking to be precise is the basic financial illiteracy of the populace. In this realm, we financial bloggers are the intelligentsia. We all deplore the relative dumbness of the populace because that dumbness itself facilitated the atmosphere and frauds that have killed the economy.
My point is this. Taxes tend to be paid by those who are doing well. Currency debasement is paid for by everyone and in our current economic condition, results in increased costs for fuel and everything fuel produces, including food. Thus, from an egalitarian perspective, currency debasement is worse than taxes. And it encourages the popular stupidity of indebtedness and excess consumption (why save a dollar today if it would only be worth a dime tomorrow?) that contributed to our current condition. Someone, somewhere must put forward the argument that currency debasement, not taxation, destroys prosperity. The reason Americans should rein in the Fed is not because the Fed is creating a new tax burden, it is because the actions of the Fed are destroying the dollar, undermining its reserve currency status and creating moral hazards of epic proportions. STOP THE FED!
You got it. Help the rich bankers while screwing most everyone else with insidiously instigated higher prices for gas and food. Most sheep have mutton to say about it, while they get grilled. The sooner the present system collapses the better. It's become blatantly corrupt.
One correction: Bill Dudley is not the Fed's Goldman liaison. He is Goldman's Fed liaison. He's just not officially on the Goldman Sack payroll yet.
does ^SPX look like its creating a massign head and shoulder pattern on 60 min?
A massaging head and shoulder pattern ending in "happy ending" costs about $250.00 in bonus land.
disgusting
Look, us folk up here at Liberty need these bonuses. See, there has been some price increase in Russian Hookers. QE2 does have its down side but frontrunning the FED eases the pain. You see, unlike other commodities, there will be no margin collapse in the high end world of "escorts" on Wall Street as input costs are passed through directly to "cumsumers" here in the land of risk free profits courtesy of the proles and mundanes.
The problem with what the fed is doing:
1. No they are not spending taxpayer dollars - they dont have any taxing authority
2. They are not (yet) debasing the currency. They, along with the Treasury are effectively creating credit to make up for the credit implosion in the private sector - so overall monetary aggregates are not (yet) balloonong.
So - what is the problem? The problem is Fairness. If they take from one sector of the economy and enrich their favored sector ( wall street) - they are not debasing the currency - but - they are creating wealth disparity and Unfairness. That is the problem.
It is a matter of semantics. The dollars that the fed pays to the PDs for the treasuries might have already been created in reserve or whatever, however by trading them for treasuries they are effectively debasing the dollar. The PDs use the currency and capital gains from the fed transaction to drive up the price of other assets like stocks, oil, food etc... This causes asset inflation which makes the dollar worth less.
offsetting deflation IS debasing currency
The POMO girl who is working her way through her MBA or whatever should find a more respectable job to get her through college. Like stripping.