http://finance.yahoo.com/tech-ticker/huge-ongoing-wall-street-subsidy-allows-banks-to-coin-money-every-day-at-savers'-expense-485282.html?tickers=xlf,%5Edji,%5Egspc,gs,jpm,bac,c&sec=topStories&pos=9&asset=&ccode=
Who's your DADDY and takes care of your every need.
Nice scam that Hank Paulson put into place isn't it? Remember him? The Treasury Secretary that came handpicked from Goldman Sachs.
Now just how convienent was that for the banks, to have someone who understood and could supply the fix for their special needs?
The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.
For the 63 straight trading days in Q1, in other words, Goldman Sachs, JP Morgan, Bank of America, and Citigroup made money trading for their own accounts.
But these days, trading isn't risky at all. In fact, it's safer than walking down the street.
Why?
Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What's more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits--by borrowing from the taxpayer and then lending back to the taxpayer.
Why is the US government still lending banks money at near-zero interest rates? Ostensibly, for the same reason that the government bailed out the banks in the first place: So the banks will lend money to small businesses, big businesses, and other participants in the "real economy."
But the banks aren't lending money to the real economy: Private sector lending has fallen off a cliff.
