Here is the NY Fed’s primary dealer list:
- BNP Paribas Securities Corp.
- Banc of America Securities LLC
- Barclays Capital Inc.
- Bear, Stearns & Co., Inc.*
- Cantor Fitzgerald & Co.
- Citigroup Global Markets Inc.
- Credit Suisse Securities (USA) LLC
- Daiwa Securities America Inc.
- Deutsche Bank Securities Inc.
- Dresdner Kleinwort Securities LLC
- Goldman, Sachs & Co.
- Greenwich Capital Markets, Inc.
- HSBC Securities (USA) Inc.
- J. P. Morgan Securities Inc.*
- Merrill Lynch Government Securities Inc.
- Mizuho Securities USA Inc.
- Morgan Stanley & Co. Incorporated
- UBS Securities LLC.
Lehman Brothers was removed – as of September 22 – and later in the year, Bear and J.P. Morgan will be consolidated into one dealer.
These are the 18 institutions that can access the lending program, the Primary Dealer Credit Facility (PDCF), directly. The commercial banking system, where consumer deposits are insured by the FDIC and regulated by the Fed, has access to a number of liquidity facilities: the Term Auction Facility (TAF), the Term Securities Lending Facilitiy (TSLF), and the Federal Reserve discount window.
Part of the problem that is plaguing non-commercial banking and non-primary dealer financials, like AIG, is that they have similar exposure to asset backed securities, but cannot access the Fed’s liquidity programs. Pension funds, insurance agencies, hedge funds, or any financial institution that is not explicitly insured under the Fed’s umbrella, can only appeal to the Fed for a direct loan. Hence, the Fed has been making a case-by-case judgment on whether a firm should access the Fed’s liquidity tap (e.g., AIG).
On Friday, the Fed threw in the towel and decided to tackle the whole kit-n-kaboodle. If the Treasury plan (modified heavily by key Congressional leaders) passes, then the U.S. government will hold the largest portfolio of asset backed securities in the whole world. Go USA! (I hope that you all can read that there is an abundant amount of sarcasm in that last phrase).