Wall Street Reaps Profits Off Fed

Is Wall Street playing the federal government for a fool? “Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties,” according to the Financial Times. In the interests of transparency, the Fed will often announce its intentions to buy particular securities in advance, which allows banks on Wall Street to inflate their prices. “The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage,” writes the FT. According to a former official at the Treasury and the Fed, “everyone games them. Their transparency hurts them. Everyone picks their pocket.”