by Pam Martens and Russ Martens
Wall Street on Parade
While the Democrats focused on the continuing predatory practices of U.S. banks and the Federal Reserve’s coziness with those same banks, three Republicans at yesterday’s House Financial Services Committee hearing delved into why the Federal Reserve is showering Wall Street’s trading houses with super cheap loans on the pretext that it’s simply part of the Fed’s routine monetary operations.
Since September 17, the Federal Reserve, through its New York Fed branch, has been funneling hundreds of billions of dollars each week to Wall Street’s trading houses, intervening in what had been a private overnight lending operation (called repurchase agreements or repo loans) between banks and other financial institutions. Since September 17, the Fed loans have grown in both size and duration with some loans extended out as far as 42 days – suggesting to many on Wall Street that there is one or more banks in trouble that peer banks simply don’t want to lend to. The Fed, however, has stuck to the mantra that this is just a routine response to a liquidity blip.