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Federal Reserve chose winners of government bond auctions

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Take a guess who came out on top? If you guessed the big Wall Street players who had to be saved from extinction on the taxpayer dime you would be correct. Sorry folks, but this is not free market capitalism. Washington really needs to quit deciding who is going to win on Wall Street or else we will always be at the mercy of a short list of companies. Why is welfare for the poor bad but welfare for the richest of the rich somehow acceptable?

The Federal Reserve secretly selected a handful of banks to bid for debt securities acquired by taxpayers in the U.S. bailout of American International Group Inc., and the rest of Wall Street is wondering what happened to the transparency the central bank said it was committed to upholding. “The exclusivity by which the process has shut out smaller dealers is a little un-American,” said David Castillo, head of sales and trading at broker Further Lane Securities LP in San Francisco, who said he would have liked to participate. “It seems odd that if you want to get the best possible price that it wouldn’t be open to anyone who wants to put in the most competitive bid.” After inviting more than 40 broker-dealers to take part in a series of auctions last year, the Federal Reserve Bank of New York asked only Goldman Sachs Group Inc. (GS), Credit Suisse Group AG (CSGN) and Barclays Plc (BARC) to bid on the full $13.2 billion of bonds offered in two sales over the past month. The central bank switched to a less open process after traders blamed the regular, more public disposals for damaging prices in 2011. This week, Goldman Sachs bought $6.2 billion of bonds in an auction.

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