by Pam Martens and Russ Martens, Wall St On Parade:

One or more U.S. or foreign banks that are primary dealers to the Federal Reserve Bank of New York is in need of longer-term loans that they are unable to get anywhere else – at least at an affordable rate of interest. That’s the only reasonable conclusion that can be drawn from the Fed’s announcement on Friday that it is extending its money pumping program to Wall Street until at least November 4 and will be offering an additional $310 billion cumulatively in term loans (most for 14-days at a time) as well as offering at least $75 billion daily in overnight loans.

The Fed’s money sluicing operation that began abruptly on September 17 is taking on the distinct appearance of its machinations during the early days of the 2008 crash – a time when it also refused to name the banks that were receiving the money until a multi-year court battle and congressional legislation forced its hand.

The open money spigot at the Fed comes at a time when global banks, including many that are among the Fed’s 24 primary dealer banks that are able to borrow from the New York Fed under its current repo (repurchase agreement) operations, have announced large job cuts. The most recent news came from the Financial Times over the weekend in a report that says HSBC is planning another 10,000 job cuts on top of the 4,700 it had previously announced.

Another European bank that is heavily interlinked via derivatives with Wall Street, Germany’s biggest lender, Deutsche Bank, has seen its stock set new historic lows all year. (See Lordy, Deutsche Bank Is Having a Helluva Bad Month.) In July, it confirmed plans to cut 18,000 jobs.

According to a chart published by Bloomberg News on September 24, job cuts planned by global banks at that point tallied up to 58,200. That was before the Financial Times reported this past weekend another 10,000 job cuts at HSBC. Securities units at both HSBC and Deutsche Bank are among the Fed’s primary dealers that are eligible to participate in its current repo loan program.

A major U.S. bank, Citigroup, is also culling hundreds of employees in its fixed income and stock-trading operations, according to a July 31 report in Fortune. The publication explained at the time that “Trading revenue at the five biggest U.S. banks on Wall Street dropped 8% in the second quarter, following a 14% slide in the first three months of the year — setting up global banks for their worst first half in more than a decade.”

The loans currently being pumped out to Wall Street by the New York Fed (the most powerful of the Federal Reserve’s 12 regional banks) are being offered only to its primary dealers. What most Americans don’t realize is that a large number of these primary dealers are the securities units of foreign banks. (See primary dealer list below.)

The primary dealers not only conduct open market operations with the New York Fed but they must also agree to be contractually bound to make purchases in every auction of U.S. Treasuries. Before the U.S. Department of Justice went into a multi-decade hibernation on the issue of anti-trust and allowed mega banks to buy up other mega banks and thereby become too-big-to-fail, there were 46 primary dealers in 1988. By 1999, that number had shrunk to 30. Today, it stands at 24.

The New York Fed must be desperate to boost its number of primary dealers because in May of this year it added a tiny brokerage firm to its roster, Amherst Pierpont, that pretty much no one outside of Wall Street has ever heard of, and possibly not even there. According to the firm’s website, it has “more than 200 employees.” The big Wall Street banks like JPMorgan Chase, Citigroup and Bank of America have over 200,000 employees.

The Fed’s money pumping operation today is reminiscent of the controversial program it set up in 2008 known as Single Tranche Open Market Operations or ST OMO. The name was cleverly designed to make it sound like part of the New York Fed’s routine open market operations when it was actually a massive bail out program to teetering Wall Street investment banks that the Fed refused for years to name. On July 7, 2011, Bloomberg News, following a Freedom of Information Act request, reported that Lehman Brothers “borrowed as much as $18 billion in four separate loans…three months before its parent filed the biggest bankruptcy in U.S. history.”

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