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How Wall Street Is Generating Trading Profits

News Link  •  Bailouts

How Wall Street Is Generating Trading Profits


08/03/2009  •  The Golden Truth 
The more alert blogs have finally figured out how Goldman Sachs, et. al. are creating enormous trading profits, especially at a time when trading volumes in most securities have seriously declined. These Wall Street firms are buying toxic, illiquid garbage which institutional investors (read: your pension fund or insurance company) have marked at low levels (yet still not low enough) and selling these securities into the Fed at the Fed's inflated bid levels. This is one way in which the Fed is injecting liquidity into the big banks - at the taxpayers' and pension investors' expense. It is also a primary reason the Fed refuses to disclose what it its paying for these toxic assets and why the Fed is spending millions in lobbying to prevent an audit. Here's the mechanics, and it's a trading ruse that was being used when I was trading junk bonds back in the 1990's: Naive pension fund has toxic crap asset marked down to 20 cents. Snake Wall Street firm has bid from 
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