The Primary Dealers/Counterparties of the Federal Reserve

In this segment we will discuss the Federal Reserve and its counterparts. 

Let us properly define counterparts,

1. A person or thing that corresponds to or has the same function as another person or thing in a different place or situation. (Online, 2021)

We will now look at what the Federal Reserve calls ‘Primary Dealers.’

“Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a pro-rata basis in all Treasury auctions at reasonably competitive prices.” (York, 2021)

The primary dealer banks are a list of twenty-four (24) large banks that must meet a net regulatory amount of capital of $50 million dollars as a broker-dealer or a government securities broker-dealer, or must maintain a $1 billion in Tier 1 capital as a state or federally chartered bank or savings association. (York, 2021)

Some may not be aware that the Federal Reserve is not a part of the federal government. (Louis) Since these banks, which are interchanged at times with others in their place, are operating on the same level with the Federal Reserve as its counterparts, this serves as proof that the Federal Reserve is a private bank owned by private banks. I hold that these counterparties/primary dealer banks are the very banks that own stakes within the Federal Reserve bank.

To give a little more perspective before we part, let us look at what the relationship or proper relationship between the Federal Reserve and the government is …

https://youtu.be/K38khtCrN-4

In the future we will go into the history of some of the banks on the primary dealer list to show the significance of the relationship between them and the Federal Reserve.

 

References

Louis, F. R. (n.d.). Making Sense of the Federal Reserve. St. Louis. Retrieved March 18, 2021

Online, O. (2021, March). counterpart, n.1. Retrieved March 5, 2021, from https://www.lexico.com/definition/counterpart?fbclid=IwAR1CpzEHStnJcef2btKPfGCenklix7FP6D5NYGVhVCmvX3FUCGCdxTBcrBM

York, F. B. (2021). Primary Dealers. New York, NY, United States of America. Retrieved March 5, 2021, from https://www.newyorkfed.org/markets/primarydealers?fbclid=IwAR0CAdQCr4B9xv_UK01aZ_RYala_Lfs4ySo-xY-w3aVRi6L2Nm6oYc-VYEA