By Pam Martens and Russ Martens: July 28, 2021 ~
You really can’t make this stuff up. A G30 Working Group Chaired by Tim Geithner, the former President of the New York Fed, that secretly sluiced $29 trillion to bail out the Wall Street banks from their hubristic collapse in 2008, released a report today calling for a Standing Repo Facility from the Fed that would be “open to a broad range of market participants….”
The ink was barely dry on that report when the Fed issued a press release today saying it was doing just that. The Standing Repo Facility (effectively meaning that it is permanent until the Fed says otherwise) will be able to lend out $500 billion in overnight loans each day at below-market interest rates. If the $500 billion runs out, Fed Chair Jerome Powell has the discretion to increase it. The repo operations will be conducted by the Open Market Desk of the New York Fed – which means that the names of the banks getting the loans will never see the light of day, unless a media powerhouse decides to stand up for democracy and transparency and take the Fed to Court.
The cringe-worthy name of Geithner is enhanced by two other cringe-worthy members of the Working Group: Larry Summers, who helped repeal the Glass-Steagall Act so that Frankenbanks on Wall Street could hold trillions of dollars of risky derivatives alongside trillions of dollars of taxpayer-backstopped deposits from moms and pops; and Bill Dudley, another former President of the New York Fed whose wife collected $190,000 a year from JPMorgan Chase, while it was “supervised” by the New York Fed.
Unlike the Federal Reserve Board, the New York Fed is not a federal agency. It is privately owned by the mega banks on Wall Street. See These Are the Banks that Own the New York Fed and Its Money Button.
To spin the appearance that this isn’t just a bailout of the trading units of the mega banks on Wall Street (the so-called “Primary Dealers” who are already approved counterparties for the Fed’s repo operations), the Fed announced that the Standing Repo Facility (SRF) will be expanded to other financial institutions. The New York Fed clarified that as follows:
“Primary dealers will continue to be counterparties for repo operations under the SRF. The SRF counterparties will be expanded to include additional depository institutions. Initially, criteria will be established to effectively manage onboarding of interested depository institutions. Consistent with the New York Fed’s commitment to ensuring its counterparty policies promote a fair and competitive marketplace, these criteria will be adjusted over time to expand depository institution eligibility. The initial criteria will allow depository institutions with holdings of Treasury, agency debt, and agency mortgage-backed securities greater than $5 billion as of June 30, 2021 or with total assets greater than $30 billion to express interest starting on October 1, 2021. All counterparties must be able to transact on the tri-party repo platform.”
The Fed also announced that it is creating a standing repo facility for foreign and international monetary authorities (FIMA). The New York Fed explained that facility as follows:
“Under the FIMA repo facility, the FOMC [Federal Open Market Committee] directed the Desk to offer overnight repo transactions at a rate of 0.25 percent to foreign central bank and international accounts against their holdings of Treasury securities maintained in custody at the New York Fed, subject to a per-counterparty limit of $60 billion. Eligible counterparties are foreign official institutions with custody accounts at the New York Fed that have been approved by the Foreign Currency Subcommittee of the FOMC.”
The Fed seems to be sensing some urgency to standing up these permanent new facilities. The domestic repo facility, loaded with $500 billion, is to become effective tomorrow.
To understand what’s really going on here, we offer the following from our archives on the Fed’s 2019-2020 foray into a pre-pandemic, money-gushing repo operation whose recipients remain secret to this day: