Now Obama has another vote-buying Wall Street scheme. The Obama Administration via the Feds are buying up all the good bonds thru QE (what is this now, QE 5-6 in reality?) while giving foreign banks a discount to unload subprime trash back into the economy – major bailout!
The following comment from a poster (named RightGuard) on Bloomberg summarized it nicely –
…the taxpayers get screwed again as the bonds were clearly priced too cheaply to guarantee profits to the cronies. open competition would have resulted in fairer market pricing. the same concept as an underwriter intentionally pricing an equity IPO too cheaply cheats the company going public and rewards the new shareholders. the only difference is that the company going public has a chance to say no to the price. the taxpayers dont have that choice as the cronies are rewarded biliions for campaign contributions in the millions. that differential is a direct cost to the rest of us taxpayers.
The Feds, with zero transparency, picked an elite, handful of banks to bid for debt securities which we the taxpayers were forced to pay for in our bailout of AIG. Small dealers were shut out. This administration likes BIG DONORS. Leaving it to a small number of bidders means the prices are not competitive.
Guess who was allowed to compete (mind you, Obama likes to pretend he hates banks when he talks to the OWS, but Goldman is his number one donor). You guessed it! The Federal Reserve Bank of New York asked only Goldman Sachs Group Inc. (GS), Credit Suisse Group AG (CSGN) and Barclays Plc (BARC) to bid on the full $13.2 billion of bonds offered in two sales over the past month. Goldman, number 1 Obama donor, bought $6.2 billion of bonds, that’s right BILLION. They offered some nonsensical excuse – you can read about it on my link.
The more bidders the better the competition and the better price for the American taxpayer, but they did the opposite. No comment from the Feds – shocking!
The horror is not over. Now the Feds are going to sell them through Maiden Lane II LLC who hold loans with the some of the highest default rates such as the infamous subprime, Alt-A and adjustable rate mortgages. This means they can’t be valued easily so it’s a bigger profit for the investor, which would be the elite, not the taxpayer.
This President is killing the middle class. There really will be a 99% if he continues.
Last year, the banks we meagerly fined and which are picking the pockets of pension funds to pay the fine were guess who – Bank of America Corp. and Citigroup Inc
Think of what this does to credit markets –
Bloomberg: The New York Fed was criticized for damaging credit markets with the regular sales, and halted them in June after disposing of about $10 billion in face value of the assets.
It resumed the sales on Jan. 19, when it unloaded about $7 billion of assets in one block to Credit Suisse, after receiving an unsolicited bid for the securities from Goldman Sachs. Only Barclays and Bank of America were invited to also participate in that auction. Goldman Sachs won the auction for $6.2 billion of bonds this week after Credit Suisse placed an unsolicited bid for the assets. Barclays, Morgan Stanley (MS) and RBS Securities Inc. were also included in that sale. Barclays presented the second- highest offer in both auctions this year, according to a person familiar with the process.
The New York Fed didn’t announce either auction until after they closed, and said the broker-dealers it included were chosen based on the strength of previous bids. The Wall Street firms, and their clients who wished to bid on the assets, were required to sign non-disclosure agreements forbidding them from discussing the offerings. At least one investor opted not to participate for that reason. Read the entire story here: Bloomberg