Support the Wall Street Examiner! Choose your level of support to receive a free proprietary report as my thanks. Click the button below to see your options. Become a Patron!

Fed Again Issues Surreptitious SNAP Payments to Bankster Welfare Queens At Taxpayer Expense

mh

UPDATE- The Fed renewed its Term Deposit facility a couple of weeks ago initially taking in $110 billion in 7 day deposits paying 26 basis points. That amount rose to $219 billion today from 69 banks.Since these payments reduce the surplus which the Fed returns to the US Treasury, the taxpayer bears the cost of the program. The US taxpayer is now on the hook for a direct subsidy to the banks on excess cash which the Fed handed them for nothing in the first place. This is an outrage. Below are the post and video I originally wrote and produced on this on June 20, 2014.

Liquidity moves markets!

Follow the money. Find the profits! 

 

June 20, 2014 – Here’s something I missed back in May that makes me mad as hell. And it should make you mad as hell too.

The Fed has expanded its Term Deposit Operations, moving more spaghetti around on the plate, the plate being the liability side of its balance sheet- aka “money.” The Fed announced that it would do 8 weekly operations with its member banks beginning on May 19. The first 4 are at approximately 26 basis points, then the next 4 at 30 basis points. These deposits are like bank CDs with a term of 7 days.

This is a direct giveaway to the banks at the expense of US taxpayers. Subject to the $10 billion per bank limit, the banks will shift as much of their excess cash as they can from their regular deposit accounts at the Fed (aka reserves) to these higher interest bearing term deposits. This is cash which the Fed has given them for free in the first place. Earn free income from free money. Nice work if you can get it.

Last week those term deposits grew by $16 billion on the Fed’s balance sheet from an operation conducted June 2. That’s just a drop in the bucket compared to what’s coming. The June 9 operation shifted $78 billion into these giveaways.

Meanwhile the Fed will continue to send them more free cash, week in and week out under QE, even though those amounts are somewhat reduced. The trick there is that the Taper does not reduce the excess cash the dealers get because the Fed has been matching QE to Treasury supply. That’s a whole ‘nother story, however, which I cover in depth in the weekly Fed Report (next one coming up this afternoon).

This will have absolutely no impact on the Fed’s balance sheet or the Primary Dealer Balance sheets. They’re still short term liabilities to the Fed and short term assets of the banks. To the banks, there’s no practical difference between their regular deposits at the Fed and a one week term deposit. It’s all excess liquidity which can be used for mischief making whenever they damn well please. The only impact will be that the additional free income the Fed now literally hands over to the banks will increase the banks’ bottom lines. This cash will subsequently be transferred to the pockets of bank CEOs and executives in the form of increased bonuses and stock option buybacks.

These payments reduce the surplus that the Fed returns to the Treasury each month. The $78 billion of these term deposits which the Fed issued last week will show up on the H41 to be published this Thursday. The interest paid to the banks on that will come right out of taxpayers’ pockets. It’s just more welfare for the banksters at our expense.  It’s an outrage.

Another outrage–this story has gotten virtually no coverage in the mainstream media. Either the Fed snuck this past them, or the media just does not care. I suspect the latter.

The next facility grew to $93 billion. More money for nothing- a gift to the banks from taxpayers. The greatest transfer of wealth in history goes on.

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both analytical and sales capacities. Prior to starting the Wall Street Examiner I worked as a commercial real estate appraiser in Florida for 15 years. I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. My perspective is not of the Ivory Tower. It is from having my boots on the ground and in the trenches of the industries that I analyze and write about today. 

  2 comments for “Fed Again Issues Surreptitious SNAP Payments to Bankster Welfare Queens At Taxpayer Expense

  1. spkotzak
    June 18, 2014 at 8:27 am

    US debt held by the Federal Reserve at the end of 2013: A new record high!

    Banksters
    “print” more money than ever!
    http://goo.gl/KrYb39

  2. bigpicture1
    June 18, 2014 at 3:22 pm

    The reason “the media” doesn’t care about stories like this may have to do with the fact that all of major media’s parent firms have one or more people from Wall St. on their boards.  Do a quick google search of ’em, it’s a fact.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.