Zero Hedge Claims that the Federal Reserve ITSELF Traded Over a Trillion Dollars Worth of Derivatives in March Alone

You know Zero Hedge, the popular website which has broken major stories like Goldman’s dominance of high-frequency trading.

Some say that Zero Hedge occasionally breaks stories before adequately fact-checking them. I don’t know whether that is true or not, but I do know that – in the months I’ve been reading the site – ZH has broken a number of major stories which:

(1) Were later covered by the world’s biggest financial news outlets


(2) Have caused Congress members, Senators, the New York Stock Exchange and others to take action to change reporting requirements and to shut down questionable practices

Zero Hedge is now claiming that the Federal Reserve itself traded over a trillion dollars worth of derivatives in March alone:

Federal Reserve Disclosed Trading $1.4 trillion in OTC “Other” Derivatives in March 2009 *corrected

Federal Reserve Does Derivatives

The Federal Reserve has apparently been engaged in OTC derivatives trading. As of March 2009, they began publishing this information in several categories broken down by ‘risk’. Tyler discovered this bombshell last Friday. In Treasury TIC data there are large sums classified as “Other Contracts”. While it is not clear what specifically is being traded , we know these are not “Single-currency Interest Rate Contracts” nor are they “Foreign Exchange Contracts”. These contracts are classified as “Other Contracts by Type of Risk” — and they include $85 billion in OTC equity derivatives , and $1.169 trillion (yes, with a T) in OTC credit derivatives.

[Click for full image]

What is interesting here is that prior to March 2009 such trading was not reported in detail. The March disclosure by category is what is completely new. These Fed OTC derivatives have $1 trillion+ in capital in “Other”. It is unclear what aspect of the credit capital markets this is allocated to or propping up: is it CDS? And if so, what entities are the contracts written on? At this time, it is unclear what relationship, if any, these $1.4 trillion in Federal Reserve OTC derivatives have to the unusual market activity many of us have been observing.

If Zero Hedge is right about this one, it will end up being one of the biggest stories of the year.

See this.

Update: The Zero Hedge author who wrote the original story clarified that the $1.4 trillion figure is not just for March, but for the reporting period:

Just a clarification — this data was reported in March 2009, but includes data over the reporting period, not just March. Regardless this is quite the bombshell!

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  • Anonymous

    It's becoming increasingly clear -this has been one massive organized-crime war being played out on this bizarre and phony "world economic" stage, the script written and couched in an archaic Nineteenth Century academic economic parlance.Lehman Bros and Merrill Lynch were given the unceremonious massacre and Goldman Sachs, Morgan Stanley and Bank of America were the intended beneficiaries, -literally inheriting a socialized (read that "fascist") U.S. economy bent on continued world dominance through empire.Well, best of luck, boys. The hornet's nest is certainly stirred up in fine historic style now.I think the only thing that has been miscalculated is what it would take to keep the ball from rolling all the way down the hill, once they got the ball rolling.And the ball is certainly rolling now. We're about a tenth of the way down the hill, and we're still picking up steam in the ongoing freefall they started. The wheels are screeching and likely to come off at any moment.Bernanke has pulled the rip-cord, and the parachute just tore itself free from its green shoots -without ever even thinking about opening. The nose-cone of this re-entry rocket is white-hot, and the eminent crash landing is apparently going to make a hole big and deep enough to drop everyone into.Oh well… The best laid schemes o' mice an' men…It's just like after the U.S. Cavalry gave Chief Pontiac and his tribe those Smallpox infested army blankets."You don't want to go up there now. There's Smallpox in all those Indian camps."No shit. Really?

  • Project

    Hi! Treasury cannot hold securities outright. Only the Fed can. The TIC data shows intl capital flows between country X and the U.S. The U.S., by definition, is on one side of the transaction. And the only entity that can participate in TIC flows via derivatives is the Federal Reserve.The Fed has a balance sheet.The Treasury is merely a printing press.TIC is the cash flow statement for the U.S. balance sheet.Cheers,Project MayhemP.S. Just a clarification — this data was reported in March 2009, but includes data over the reporting period, not just March. Regardless this is quite the bombshell!