Sabri writes:
Marv:
I have very great difficulty understanding how the reserves Goldman and
JPMC
keep on deposit with the Fed explains their profitability.
I never remember saying anything like the above.
MG: Fair enough. I shouldn't and didn't intend to put words in your mouth. I
was responding to the suggestion in the short blog item referred to the list
by Louis on Wednesday that the huge profits being recorded by by the banks
were the result of the Fed's largesse being directed into "short-term bonds
that pay 2 or 3 percent annual interest", and what seemed to me to be
susequent support for that position or a variant of it concerning Fed
interest payments on reserves.
Turns out the blogger is some computer geek who said he got that idea from
"a friend who has worked in the money business." His profile is here:
http://philip.greenspun.com/
All I said was what is below:
A big chunk of the money they are making may be coming from here:
http://research.stlouisfed.org/fred2/series/BOGNONBR?cid=123
...Given that this started
about a year ago, some banks must have made hundreds of millions.
MG: Perhaps. I wasn't able to establish this from the document you cited
above nor from the several Fed publications which I consulted looking for a
breakdown in the aggregate statistics by depositary institution, amount of
reserves, and interest earned since last year, nor from some supplementary
googling trying to hunt down that information. I'd be interested in learning
whether such data exists. In any case, I think all can agree that even
hundred of millions in reserve account interest pales in comparison with the
tens of billions in profits alone generated by the Goldman and JP Morgan
Chase trading desks this year.
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