The United States Federal Reserve Bank (the Fed) is bailing out the billionaires again. This time the Fed is making certain that losses suffered by hedge funds are reversed. Hedge funds are not banks. They are private billionaire investment clubs which manage investments for clients and which cannot have more than 99 clients. This is why many hedge funds will not take on clients who are unwilling or unable to invest $10 million or more with them.
On March 16, 2020 the Wall Street Journal reported Hedge Funds Hit by Losses in “‘Basis Trade.’ A wide swath of hedge funds was hit by the recent unwinding of the so-called basis trade last week. The basis trade is a long-running investment that seeks to exploit pricing gaps between Treasury securities and futures.” This is a useless activity in which nothing is made, no services and no goods are produced.
The Journal went on, “The Federal Reserve rushed to repair disorderly trading conditions in the Treasury market last Thursday.” Translated, that means the Fed rushed in to make certain these billionaire investor Hedge Funds did not lose money. Not until 2008 did the Fed rush in to save billionaires from their stupid investment losses through banks and other forms of business, like hedge funds.
The Journal went on, “The Fed’s intervention Thursday and over the weekend ended up aiding Citadel and many (hedge) funds deploying the basis trade, said people familiar with the matter.” That means whatever the Fed did made certain rich folks did not lose money. Citadel manages about $30 billion for 99 or less clients.
Guess who works for Citadel. None other than Ben Bernanke, the former Chairman of the Fed, and the person who turned the Fed into a money laundering organization for billionaires back in 2008-09. The New York Times reported back in 2015, “For eight years, Ben S. Bernanke, the former Federal Reserve chairman, was steward of the world’s largest economy. Now he has signed on to advise one of Wall Street’s biggest hedge funds. Mr. Bernanke will become a senior adviser to Citadel, the $25 billion hedge fund founded by the billionaire Kenneth C. Griffin. He will offer his analysis of global economic and financial issues to Citadel’s investment committees. He will also meet with Citadel’s investors around the globe. It is the latest and most prominent move by a Washington insider through the revolving door into the financial industry.”
“In an interview, Mr. Bernanke said he was sensitive to the public’s anxieties about the “revolving door” between Wall Street and Washington and chose to go to Citadel, in part, because it “is not regulated by the Federal Reserve and I won’t be doing lobbying of any sort.”
It is odd that this billionaire investor club and other hedge funds are getting bailed out by the Fed since the Fed does not regulate them. The Fed is simply printing up money by the billions and rescuing them and their clients from their losses. Why is the Federal Reserve ensuring that billionaire investor clubs do not lose money, and how does Bernanke’s employment depend on the Fed’s actions?
Hedge funds, like Citadel, do not make produce anything that you use, such as machines, food and water. They simply gamble with other people’s billions.
Why is it that when rich people make incredibly stupid investment decisions the government and or the Fed is always there to bail them out? The answer is we do not have a democracy. We have plutocracy in which the rich rule via both of their major political parties.
The billionaires reap the benefits of the financial markets when the markets are going up but do not have to share in the losses with the 99 percent when the markets are heading down.
Historically, the Fed was supposed to serve as a central bank by providing short term loans to banks when necessary and only if the needy banks had “good collateral.” Its job is also to keep inflation and unemployment low using interest rates, and buy U.S. debt when nobody else wants to buy them. That changed in 2008 when the bank under the direction of Ben Bernanke gave $26 trillion to twelve banks, four of them foreign. That is when the Fed became a money laundering criminal enterprise for the wealthy. For that report click The CoronaVirus Stimulus Bill: The Rich Get 5 Trillion, We Get Crumbs