The reason for asking, is that this seems to be the view of the Fed. Why else would its new “Term Auction Facility (TAF)” allow for banks to secretly borrow reserves from the Fed?

Those of us who think that Wall Street folks might not always be entirely honest, might suspect some insiders
will trade stock based on the fact that they know certain banks have borrowed heavily through the TAF. This could allow for substantial profits at the expense of the outsiders who don’t know about this borrowing.

Given recent events and disclosures about SIVs, CDOs, CMOs and other creations of the wizards of Wall Street, it seems reasonable for reporters to ask the Fed about how it will prevent such insider trading. I look forward to reading the answers.

–Dean Baker

Dean Baker is senior economist at the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, including Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Read more about Dean.