'QE2's disappearing act'

from ellen brown and asia times online..........

"The Federal Reserve's "QE2" ended with a whimper on June 30. The Fed's second round of "quantitative easing" involved US$600 billion created with a computer keystroke for the purchase of long-term government bonds. But the government never actually got the money, which went straight into the reserve accounts of banks, where it still sits today. Worse, it went into the reserve accounts of foreign banks, on which the Federal Reserve is now paying 0.25% interest. 

Before QE2 there was QE1, in which the Fed bought $1.25 trillion in mortgage-backed securities from the banks. This money too remains in bank reserve accounts collecting interest and dust. The Fed reports that the accumulated excess reserves of depository institutions now total nearly $1.6 trillion. 

n carrying out its QE2 purchases, the Fed had to follow standard operating procedure for "open market operations". It took secret bids from the 20 "primary dealers" authorized to sell securities to the Fed and accepted the best offers. The problem was that 12 of these dealers - or over half - are US-based branches of foreign banks (including BNP Paribas, Barclays, Credit Suisse, Deutsche Bank, HSBC, UBS and others), and they evidently won the bids.

The fact that foreign banks got the money was established in a June 12 post on Zero Hedge by Tyler Durden (a pseudonym), who compared two charts: the total cash holdings of foreign-related banks in the US, using weekly Federal Reserve data; and the total reserve balances held at Federal Reserve banks, from the Fed's statement ending the week of June 1. The charts showed that after November 3, 2010, when QE2 operations began, total bank reserves increased by $610 billion. Foreign bank cash reserves increased in lock step, by $630 billion - or more than the entire QE2"....................READ MORE.