FedUpUSA

Archive for January, 2010

Threats from the White House Press Secretary Robert Gibbs were issued this morning on Fox News Sunday.  When asked what the financial repercussions might be if Ben Bernanke failed to be re-confirmed, he stated: “The best way to not have to deal with those repercussions is to support Ben Bernanke for a second term.”  Mr. Gibbs further said that senators could support stability in the financial system by backing Mr. Bernanke.

The stock market has lost all of its gains for the year as of Friday.   Coincidence this happens just before the senate convenes to vote on Bernanke’s reconfirmation?  I think not.  Long-time readers of FedUpUSA have seen enough evidence that the Federal Reserve has been the biggest force in the stock market since last March to see clearly what has happened to our ‘free market’ economy.*  It has been the Federal Reserve’s low-interest rate liquidity that has allowed the member banks through their trading desks to elevate market price on very low volume.  Take away the liquidity and……

I would encourage the Senate to refuse to bow to threats and financial terrorism.

* Long-time readers will remember this from September 24, 2008:

FLASH: Fed Speaking Out Both Sides Of Mouth

Posted by Karl Denninger

The Fed has claimed that this is a “liquidity crisis.” Really Ben?  Then perhaps you can explain this?

 Note that this is an intentional drain of “slosh”, or liquidity, from the banking system.  $125 billion in the last four days drained?

 You wouldn’t be trying to intentionally cause a bank failure or two to bolster your call for the $700 billion “bailout” plan, or perhaps intentionally lock the short-term credit markets, would you Ben?

 If the market has a liquidity crisis, why would you be intentionally draining reserves from the banking system?  Don’t you think you ought to explain that to Congress?

What was the market’s response to Ben’s pulling the $125 Billion in liquidity? 

Irrefutable proof that they used market manipulation to scare Congress into giving Hank Paulson his $700 Billion bazooka.  So yeah, they CAN do it; the question is, how long will the American People stay hostages to the reign of financial terror wrought by the Federal Reserve?  Even more importantly, exactly how long will Congress allow this power to be wielded over them and the American People?

Maybe Janet Napolitano’s time would be better spent focusing on the REAL terrorists?  Perhaps someone should inform the Department of Homeland Security?

A Message To Our Senate: Defeat Bernanke

Posted by Karl Denninger

The reaction from Wall Street and The White House should not have surprising when it comes to Bernanke’s nomination.  We heard people like Robert Gibbs say:

Asked about the potential financial repercussions of the U.S. Senate voting against Bernanke, Gibbs said, “The best way to not have to deal with those repercussions is to support Ben Bernanke for a second term.”

Gibbs said senators could support stability in the financial system by backing Bernanke’s renomination.

This is a blatant and outrageous lie.

The historical record is clear and incontrovertible.  Ben Bernanke caused, both directly and indirectly, the housing bubble and as a consequence the inevitable crash. 

He has refused to take actions that would prevent it from happening again.  Indeed, he has promoted even more concentration of risk through intentional acts of aggregation of banking interests, taking “too big to fail” to a new level of “outrageously too big to fail.”

And finally, he has argued for and fostered a ridiculously unsustainable spending binge by Congress which has destroyed The Federal Government’s ability to effectively intervene when, not if, the next market crisis comes.

The facts are simple:

Bernanke intentionally allowed the growth of credit aggregates at rates of 50% to 100% faster than GDP over the last decade, a direct violation of the law governing The Federal Reserve and the underlying and necessary predicate for the bubble to occur.  Bernanke was, in fact, the loudest Federal Reserve advocate of Greenspan’s “easy money” policies after the 2000 Nasdaq market collapse.

Bernanke has willfully and intentionally ignored basic mathematical facts related to the growth in credit aggregates – specifically, that permitting credit aggregates to grow faster than GDP always must eventually, if maintained, lead to a massive credit bust.  This is a function of basic mathematics – specifically, exponents.  All the fancy ”econometric models” in the world cannot violate the basic laws of mathematics.

Bernanke refused to regulate lending and securitization by the banks during the housing bubble despite the fact that the FBI issued a formal warning of massive fraud in 2004 and both HUD and Corelogic issued studies in 2005 and 2006 showing nine of ten borrowers in “ALT-A” loans had lied about their incomes.  Without suckers to buy these worthless securities this irresponsible lending could not have taken place.

Bernanke’s willful refusal to both conform with the law and regulate the banks fostered the environment in which they have and continue to asset-strip the citizens of this nation.  Bluntly put the big banks are paying out 1% of GDP to a few thousand people not due to hard work, industry and innovation but rather due to rank exploitation and deliberate mispricing of risk with the costs of these outrageous and intentional acts shifted to the citizens of this nation.

Bernanke has intentionally concealed the terms and beneficiaries of bailouts and handouts despite multiple requests from Congress and The Press, has fought FOIA requests, has ignored Congress outright and just recently failed to fully comply, in the opinion of Representative Darrell Issa, with the Congressional subpoena issued by the committee on which he sits.

Bernanke has in fact been dead wrong on virtually every pronouncement he has made over the last ten years on economic matters, including claims that there was no housing bubble as late as 2006, that subprime was contained, that we would not experience a recession, that his policy prescriptions would stabilize the economy and job market and that if EESA/TARP was passed the stock market would not collapse.  Each and every one of those claims was in fact wrong.  A weatherman would be fired for a predictive record far better than Bernanke’s.

Bernanke claimed, in sworn testimony, that he would not monetize the debt.  While he was speaking – almost literally to the hour – The Federal Reserve was in fact monetizing $300 billion in Treasury debt and $1.2 trillion in Fannie and Freddie Securities – securities we now know are stuffed full of fraudulent mortgages that Fannie and Freddie bought during the bubble years.

Bernanke has refused to accept responsibility for his policies.  He gave a major speech in January in which he defended not only his record but also the willful and intentional misapplication of his favored policy “pointer”, known as The Taylor Rule.  The author of that rule, a highly-respected academic professor, responded with a scathing (in academic terms) reply pointing out that “as written” Bernanke and Greenspan had held interest rates far too low for too long and thus fueled the speculative frenzy that led to this collapse.

Bernanke claims to have a plan to exit his “extraordinary measures” but has refused to explain that plan.  This is likely because he has not supported the mortgage-backed security market, he is, in fact, the market, having now bought literally more than the entire net issuance in 2009!  The reason Bernanke has not explained his exit strategy is simple: he doesn’t have one.

Bernanke has willfully and intentionally ignored obvious and clear indications of front-running in the bond market while he has been running his “quantitative easing.”  There have been inexplicable pricing moves in the Treasury Market in the very specific issues that were then bought by The Fed just hours or days later.  While there is no “smoking gun” proving that The Fed has communicated to certain market participants what would be bought, and then intentionally overpaid for those very same securities, it is impossible to look at this market’s performance in an objective, statistical fashion over the last year and not reach the inescapable conclusion that someone, or a handful of someones, have been cheating.

The people have had it with Bernanke, the banks and The Federal Reserve’s complicity and willful blindness in the looting of our nation. 

We the people are tired of being told that we not only must sit still for being looted on the way up but then must bail out those who get caught holding the bag when the inevitable bust follows the fraud-laced boom – a pattern of conduct that has been intentionally played out at the expense of Americans twice in the last ten years.

As a matter of public policy these actions are irresponsible, unacceptable and outrageous.  They constitute outright theft from the citizens of this nation both on the way up and on the way back down.

There are many who say that “there is no other reasonable alternative.”  This is outrageously false as well.  Paul Volcker is one obvious choice, assuming he wants the job.  Another obvious choice would be John Taylor - author of The Taylor Rule and a highly-respected academic.  There are others, of course but these two are clear alternatives that make sense, with Mr. Volcker being arguably the best-respected central banker of the last 100 years and the man who singularly put a stop to what could have easily been a disastrous descent into monetary hell in the 1980s.

The Senate has 1/3rd of their ranks up for election.  Every Senator standing for election this year that votes for Bernanke is at risk of losing his or her seat, as Massachusetts shows. 

Remember Senators that Massachusetts saw a more than thirty point swing from Democrat to Republican – and to a near-literal unknown candidate – in less than thirty days time.

There is not one Senate seat that can survive such a swing at the polls. 

NOT ONE OF YOU HAS A SAFE SEAT.

Massachusetts was about much more than health care.  It was about the Democrat Majority the people put into power claiming that they would bring change to Washington DC – that “captains of industry” would no longer be free to loot and steal from the common man in all of its forms, whether it be in health care, offshoring jobs, passing 2,000 page bills in secret or predatory lending.  Instead of keeping that promise The Democrats instead increased the looting of the people, with big banks now paying out 1% of GDP in bonuses – $145 billion – to a few thousand people with each of those dollars literally stolen from the rest of us.

We the people have had enough and you are on notice: What happened in Massachusetts can and will happen across this land come November.  We, not you, are the ones with the power and we WILL dispossess you of your jobs just as you have allowed the banksters to dispossess us of our homes, our wealth and our jobs.

Remember well as you vote Senators, because we the people are damn tired of being looted, financially raped and robbed, and Ben Bernanke both put in place the conditions leading to and has in fact refused to put a stop to these acts!

IF YOU DON’T PUT A STOP TO IT HERE AND NOW WE WILL FIRE YOU AND REPLACE YOU WITH SENATORS THAT WILL.

That’s a promise.

William K. Black’s Theory of Corporate Fraud

The Formula for This Market Rally In Simple Terms

Written by Graham Summers   

I’m about to share with you the basic outlines for this market rally started March 2009. In no way shape or form am I providing official recommendations or investment advice in this post. I am merely pointing out the obvious trends that this rally has followed.

 The first, most obvious trend is the Manic Mondays trend. I’ve commented on the weekly Monday ramp job that has been occurring in the markets for months now. However, Dr. Robert McHugh as done extensive analysis on this trend, showing that for the 43 weeks ended Friday January 8, 2010, stocks have rallied on 30 out of the 43 Mondays.

 Even more significantly, these Monday ramp jobs have contributed the bulk of the market rally’s gains since March 2009. McHugh comments that all told, 80% of the gains stocks have posted since March 2009 have come on Mondays.

 The significance of this trend cannot be overstated. Someone (or several someones) has been pushing S&P 500 futures up virtually every weekend since this rally began. Since most Wall Street traders take their cues from the overnight futures market, this has resulted in massive gap ups on most Monday mornings.

 By the way, the “Monday effect” works even when the market is closed on Monday as yesterday’s action attested. All you need is a weekend and light futures trading to produce a Manic Monday.

The second trend that has dominated this market since the March 2009 bottom is the Bernanke Options Expiration juicing. In simple terms Ben Bernanke has shown a REAL preference for pumping money into the financial system on the exact week when options are expiring. I’ve bolded the expiration weeks in the table below. You’ll notice the LARGEST Fed moves have ALL occurred on expiration weeks.

 You’ll note that on non-expiration weeks, the largest Fed move was a $38 billion capital infusion. However, ON expiration weeks the SMALLEST move is $46 billion. And the largest expiration pump is a whopping $80 billion, which interestingly enough occurred during a time in which stocks were starting to break down. Interestingly enough, the SECOND largest Fed pump occurred in November another time in which stocks were breaking down.

 Coincidence?

 Options expiration week historically is a time of GREAT market manipulation as Wall Street traders try to push their positions into the black so they can close them out at a profit. For the Fed to be making its biggest infusions of capital on ALL of these dates is “a bit odd” to say the least. The fact it has occurred like clockwork for months makes this trend almost as regular as the Manic Monday Ramp Job.

 The final trend that has dominated this market is cousin to the Manic Monday Ramp Job. It is the Night Session Ramp Job. I’ve already mentioned this trend in previous essays so I’ll keep today’s comments short. The simple fact is that from September 13, 2009 until year-end, ALL of the stock market’s gains occurred in the over-night futures session from 4:00 ET to 9:30 AM ET.

 Tyler of ZeroHedge was the first to identify this trend and created the following graphic. It sums up this trend perfectly.

As you can see, for the last three months of 2009, the market basically traded sideways during the normal day session (9:30ET to 4PM ET). In contrast, the after hours futures market (4PM ET to 9:30AM ET) accounted for ALL stock gains.

 So there you have it, the three most dominant trends of this market rally. None of them are pretty. None of them involve fundamentals. And ALL of them are directly related to the Fed’s liquidity pump.

 Good Investing!

 Graham Summers

Scandal: Albert Edwards Alleges Central Banks Were Complicit In Robbing The Middle Classes

Submitted by Tyler Durden

We apologize in advance for the NY Magazine-style headline, but this is a report that has to be read by all Senators who are preparing to reconfirm Bernanke for a second term. When voting for the Chairman, be aware that all of America will now look at you as the perpetrators who are encouraging the greatest inter and intra-generational theft to continue, and as prescribed by Newton 3rd law, sooner or later, an appropriate reaction will come from the very same middle class that you are seeking to doom into a state of perpetual penury and a declining standard of living.

America spoke in Massachusetts, and will speak again very soon if you do not send the appropriate signal that you have heard its anger – Do Not Reconfirm Bernanke.

You have been warned.

We present Albert Edwards’ latest in its complete form as it must be read by all unabridged and without commentary. These are not the deranged ramblings of a fringe blogger – this is a chief strategist for a major international bank.

Theft! Were the US & UK central banks complicit in robbing the middle classes?

by Albert Edwards, Societe Generale

Mr Bernanke’s in-house Fed economists have found that the Fed wasn’t responsible for the boom which subsequently turned into the biggest bust since the 1930s. Are those the same Fed staffers whose research led Mr Bernanke to assert in Oct. 2005 that “there was no housing bubble to go bust”? The reasons for the US and the UK central banks inflating the bubble range from incompetence and negligence to just plain spinelessness. Let me propose an alternative thesis. Did the US and UK central banks collude with the politicians to ‘steal’ their nations’ income growth from the middle classes and hand it to the very rich?

Ben Bernanke?s recent speech at the American Economic Association made me feel sick. Like Alan Greenspan, he is still in denial. The pigmies that populate the political and monetary elites prefer to genuflect to the court of public opinion in a pathetic attempt to deflect blame from their own gross and unforgivable incompetence.

The US and UK have seen a huge rise in inequality over the last two decades, as growth in national income has been diverted almost exclusively to the top income earners (see chart below). The middle classes have seen median real incomes stagnate over that period and, as a consequence, corporate margins and profits have boomed.

Some recent reading has got me thinking as to whether the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people?s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction? The emergence of extreme inequality might never otherwise have been tolerated by the electorate (see chart below). And now the bubbles have burst, along with central banks? credibility, what now?

After reading Ben Bernanke?s speech, once again denying culpability for the bubble, I really didn?t know whether to laugh or cry (remember that Ben Bernanke, like Tim Geithner, was a key member of the Greenspan Fed). I feel like Peter Finch in the film Network, sticking my head out of the window and shouting “I’m as mad as hell and I’m not going to take it anymore!” Although criticism of the Fed (and the Bank of England) has now become louder and more widespread, I feel my longstanding derision for their actions during the so-called ?good years? puts me in a stronger position than some to offer further comment.

Opening my 2002-2005 file of old weeklies I did not have to go any further than the first paragraph of the top copy (end of December 2005). “As far as Alan Greenspan’s tenure at the Fed is concerned, we have spared few words of derision. We have made plain our views that the supposed US prosperity that has accompanied his tenure has been based on a grotesque mountain of debt. We have likened the economy to a Ponzi scheme which will ultimately collapse. He has allowed the funding of strong economic activity by mortgaging the US’s future against one bubble (equity) and then another (housing), which is now beginning to implode”. These are almost consensus thoughts now, but not then.

The pigmies that populate the political and monetary elites prefer to genuflect to the court of public opinion. Blaming the banks is simply a pathetic attempt to deflect the public fury from their own gross and unforgivable incompetence. We have stated before that banks are not the primary cause of the bust. Just as in Japan, a decade earlier, bank problems are a symptom of the bust. It is the monetary and regulatory authorities that are responsible for this mess. And it is not just obvious in retrospect. It was perfectly obvious from the beginning.

I was shocked by a recent survey of Wall Street and business economists, published in the Wall Street Journal (see Bernanke View Doubted 14 Jan? link). Asked whether they agreed or disagreed with the proposition ‘excessively easy Fed policy in the first half of the decade helped cause a bubble in house prices’, some 42, or 74% agreed with the proposition. So unbelievably there are still 12 economists surveyed who did not agree! Even more incredible, a majority of academic economists did not agree with the proposition. Maybe they have sympathy for a fellow academic or maybe they actually believe the preposterous proposition that the western central banks were not in control of the bubbles which were primarily due to tidal waves of surplus savings washing across from Asia.

John Taylor shows this to be nonsense. There was no global savings glut (see chart below)

John Taylor is well known for his famous ?Taylor Rule? for the appropriate level of interest rates and he has been very vocal in his criticism of Fed laxity in the aftermath of the Nasdaq crash in his paper ?The Financial Crisis and Policy Responses: An Empirical Analysis of What Went Wrong’, Nov. 2008 and elsewhere – link. His thesis is simple. Lax monetary policy caused the boom in housing upon which euphoric credit excesses were built. The subsequent bust was an inevitable mirror image of the boom. This simply would not have occurred had the Fed (and the Bank of England) acted earlier to tighten policy as shown in the Taylor?s counterfactual profiles (see charts below).

More recently, the San Francisco Fed published a paper this month showing that those countries which saw the steepest run-up in house prices over the last decade also saw the largest rise in household sector leverage (see charts below and link). Of course the causality runs both ways. Loose monetary policy generates higher borrowing which pushes up house prices. Subsequently this prompts other households to borrow against the rising value of their houses to finance consumption via net equity extraction.

Generally most commentators have fallen for the populist line that the banks are to blame. Very rarely does a leading commentator pin the blame where it deserves to be ? on the central banks. Hence, I was very interested to read the Financial Times Insight column on Tuesday from the deep-thinking columnist, John Plender (interestingly his title in the print edition was “Blame the central bankers more than the private bankers” was changed to “Remove the punchbowl before the party gets rowdy” in the web edition – link).

Plender?s point is classic Minsky. An unusually long period of economic stability, also known as The Great Moderation, engineered by Central Bank laxity inevitably created the conditions for the subsequent bust. “Central banks clearly bear much responsibility for past excessive credit expansion. The Fed’s gradualist and transparent approach to raising rates in middecade also ensured that bankers were never shocked into a recognition that unprecedented shrinkage of bank equity was phenomenally dangerous. Despite the popular perception that financial innovation caused so much of the damage in the crisis, the rise in bank leverage was a far more important factor”. His point that it takes guts to remove the punch-bowl when the party is in full swing is spot on. The Fed and the Bank of England were both gutless and spineless. Their love affair with The Great Moderation meant they simply were not prepared to tolerate a little more pain now to avoid a Minsky credit bust and massive unemployment later.

But what is the relationship, if any, between this extreme central bank laxity in the US and UK and these countries being at the forefront for the extraordinary rise in inequality over the last few decades (see cover chart)? And does it matter?

I was reading some typically thought-provoking comments from Marc Faber in his Gloom, Boom and Doom report about current extremes of inequality. It reminded me that our own excellent US economists Steven Gallagher and Aneta Markowska had also written on this. To be sure, the rise in inequality has been staggering in the US in recent years (see charts below).

It is well worth visiting the website of Emmanuel Saez of the University of California who has written extensively on this subject and now has updated his charts up until the end of 2008 (data available in Excel Format ? link). The New York Times reported on the recently released Census Bureau data and showed not only that median income had declined over the last 10 years in real terms, but that this is the first full decade that real median household income has failed to rise in the US - link. What is also so interesting from Professor Saez?s cross-sectional research is how inequality has clearly risen fastest in the Anglosaxon, freemarket economies of the US and the UK (also note that France, with much higher levels of equality, saw much more subdued growth in household leverage).

Our US economists make the very interesting point (similar to Marc Faber) that peaks of income skewness ? 1929 and 2007 ? tell us there is something fundamentally unsustainable about excessively uneven income distribution. With a relatively low marginal propensity to consume among the rich, when they receive the vast bulk of income growth, as they have, then the country will face an under-consumption problem (see 9 September The Economic News ?- link. Marc Faber also cites John Hobson?s work on this same topic from the 1930s).

Hence, while governments preside over economic policies which make the very rich even richer, national consumption needs to be boosted in some way to avoid underconsumption ending in outright deflation. In addition, the middle classes also need to be thrown a sop to disguise the fact they are not benefiting at all from economic growth. This is where central banks have played their pernicious part.

I recalled seeing another article from John Plender on this topic back in April 2008. His explanation for why there had been so little backlash from the stagnation of ordinary people?s income at a time when the rich did so well was simple: ?”Rising asset prices, especially in the housing market, created a sense of increasing wealth regardless of income. Remortgaging homes over a long period of declining interest rates provided a convenient source of funds via equity withdrawal to finance increased consumption” – link.

Now you might argue central banks had no alternative in the face of under-consumption. Or you might conclude there was a deliberate, unspoken collusion among policymakers to ?rob? the middle classes of their rightful share of income growth by throwing them illusionary spending power based on asset price inflation. We will never know.

But it is clear in my mind that ordinary working people would not have tolerated these extreme redistributive policies had not the UK and US central banks played their supporting role. Going forward, in the absence of a sustained housing boom, labour will fight back to take its proper (normal) share of the national cake, squeezing profits on a secular basis. For as Bill Gross pointed out back in PIMCO?s investment outlook ?Enough is Enough’ of August 1997, “?When the fruits of society’s labor become maldistributed, when the rich get richer and the middle and lower classes struggle to keep their heads above water as is clearly the case today, then the system ultimately breaks down.”- link. In Japan, low levels of inequality and inherent social cohesion prevented a social breakdown in this post-bubble debacle. With social inequality currently so very high in the US and the UK, it doesn?t take much to conclude that extreme inequality could strain the fabric of society far closer to breaking point.

Front Running the Fed

I had a friend from the old neighborhood who was Comptroller of a major casino in Las Vegas in 1970-80s, where I also was married in 1981. Only lasting win from there, ever.

According to this dour son of Italy the way he could spot a problem, besides the more aggressive methods of observation and detection, would be to examine the returns on a table basis. In the short run they will vary, but in the longer term each game will provide a statistical return that rarely deviates from the forecast, unless someone is cheating. We would walk through the casino, and he would point to a table game and say “at the end of the month, this table will bring in xx percent.”

It was he who introduced me to Bill Friedman’s book, Casino Management, which is a useful read if you wish to learn more about that end of the speculative business from the house perspective.

Attached is some information from a reader. I cannot assess its validity, not being in the bond trading business. But it does sound like someone has tapped into the Fed’s buying plans to monetize the public debt and is front running those buys, essentially ‘stealing’ money from the public. Its what they call ‘a sure thing.’

To try and figure out who might be doing it, I would look for some big player who is showing extraordinary returns on their trading, with consistent profit that is not statistically ‘normal,’ too consistently good. The problem with cheaters is that they sometimes get greedy and call attention to themselves.

In Las Vegas the bigger cheats were often taken out into the desert for further inquiry and final disposition. On Wall Street they are somewhat more arrogant and persistent, defying resolution with that ultimate defiance, “We’ll just find other ways to cheat again.”

Time for a trip to the desert?

Here are a reader’s observations from the bond market.

From a reader:

I used to work for a BB on a prop desk until the financial crisis took hold and they fired the less senior guys on the desk. I now trade US Treasuries, for a small prop firm in xxxxx, to scalp basis trades in mostly on the run securities. Occasionally, I will also take position in the repo markets for off the runs if I see something “mispriced.” Your recent article piqued my interest because we too have noticed “shenanigans,” of sort, in the QE program of USTs.

What we noticed, especially in smaller issues like the 7 Year Cash is that before a Fed buy back would be announced the price would pop significantly as buyers would run through all the offers on two major electronic exchanges (BGC Espeed and ICAP BrokerTec). This occurred more than several times as the 7 Year Cash would be overvalued both by its BNOC by 20-30 ticks and its relative value to similar off the runs. This buyer(s) would lift every offer they could, driving the price substantially above its “value” for sometimes a week at a time. After this buying would occur, the Fed would then announce the purchase of that security sometimes a handle above its approximate value. This “luck” did not just occur in the on the run 7 Year sector, it also occurred in the 30 Year Cash, 3 Year Cash, and more than several off the runs. Again, it was especially prevalent in the less liquid treasury products. Often the “appetite” for these securities would begin approximately 2 weeks to 1 week before the official Fed announcement. The buying was well organized and done in such a way as to completely knock it off kilter from its relationship with like cash Treasuries and the CME Ten Year Contract. If you examine the charts of some of the selected buy backs before the official announcement, you will see a similar occurrence.

While I have not broken this down into a paper to prove it (and I see nothing positive coming out of contacting the ESS-EEE-SEE about this issue), I can assure you that it was occurring on a consistent basis across the entire curve.

A certain issuance would be bid up through the market (substantially above value, as derived by several metrics) only to be later gobbled up by the Fed at the unreasonable price. These player(s) had substantial pockets as we, the small guys (but with a decent capital base), would take the other side of what seemed to be an obvious fade. While this did not occur in every single issuance of the QE program, it occurred often enough to be obvious to any learned observer.

While I am not sure if this can be attributed to purposeful Fed policy or someone at the Fed talking to his pals, I am certain it transpired.”

Corruption is inevitable when the government is engaged in manipulating the markets with public monies. That portion of the Fed’s activities needs to be scrutinized by the GAO on a continual basis. And the activities of the Exchange Stabilization Fund and the Treasury in market intervention should be subject to review by the legislative branch on behalf of the people.

Of course another option is to keep the Fed and the Treasury out of the public markets altogether excepting short term interest rates and specifically identified emergencies.