Published on Gold Anti-Trust Action Committee (http://www.gata.org)

Pam and Russ Martens: Here's why the New York Fed doesn't want you to see its Wall Street-esque trading floor

By cpowell
Created 2020-01-20 17:43

By Pam and Russ Martens
Wall Street on Parade
Monday, January 20, 2020

The New York Fed is so protective of its surreptitious trading relationship with Wall Street that it previously denied Wall Street On Parade a photo of its trading floor. (We obtained the one pictured in this column from a Fed educational video.) The New York Fed is, by the way, the only one of the 12 regional Federal Reserve banks to have a trading floor.

The New York Fed has been allowed by Congress to insert itself so deeply in markets that it's highly possible that history will find it at least partly responsible for the next market implosion.

... Dispatch continues below ...


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The well-promulgated notion that the Federal Reserve began heavily meddling in the repo loan market on September 17 of last year is a piece of fiction. According to the U.S. government's own database, residing at the Office of Financial Research, from 2014 through December 31, 2017, the New York Fed was engaged in repo transactions with U.S. money market funds with $200 billion to $400 billion changing hands on pivotal days. For example, on December 31, 2015, the Fed engaged in $424 billion in repo transactions; on December 31, 2016, $403 billion changed hands; and as recently as June 30, 2017, $354 billion changed hands between money market funds and the New York Fed.

These repo transactions were called reverse repurchase agreements (reverse repos), where the New York Fed sold U.S. Treasury securities it held to money market funds with a stated agreement to repurchase the security at a specified price on a specified date in the future. The difference between the sale price and the repurchase price, adjusted for the number of days outstanding, implies a rate of interest paid by the New York Fed on the transaction.

Because a money market fund could make a very large transaction with the New York Fed without concern about a default by a dozen other Wall Street bank counterparties among whom it might have otherwise attempted to spread its risk, the New York Fed became the reverse repo loan counterparty of choice, rapidly dominating the market. ...

... For the remainder of the analysis:

https://wallstreetonparade.com/2020/01/heres-why-the-new-york-fed-doesnt... [2]

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