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Comment by rhizome | Hacker News Reader

Hopefully this isn't too political for HN, but I suggest combining your surprise with the news that China was given a direct line around Wall Street to buy Treasuries directly from the USG:

http://www.reuters.com/article/2012/05/21/us-usa-treasuries-...

There's a relationship here.

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> "China was given a direct line around Wall Street to buy Treasuries directly from the USG"

This isn't particularly surprising - several large "real money" investors (pensions and the like) have had this sort of relationship with the Treasury. It enabled them to directly place bids on Treasury issuance without going through Primary broker-dealers (Wall Street). They were called "Directs" and would bid through the "TreasuryDirect" system.

Basically enabled the largest investors in USG securities to bypass the "commissions" other investors would pay to Wall Street firms.

I'm guessing that for some reason foreign accounts such as governments and sovereign funds had not been given access to this system for some reason, and after a point, the Chinese government investment funds (which are some of the largest in the world both in terms of funds managed and funds committed to the US) laid bare the inconsistency that they'd been disallowed this, simply on the grounds of being foreign.

Otherwise unremarkable.

How do you balance that with the post below that the commissions you identify aren't allowed to be charged for these kinds of transactions?

Any and everybody can bypass Wall Street to purchase US Treasury bonds:

http://www.treasurydirect.gov/

That line is available to any other central bank in the world without going through primary dealers at all - it's just that China is using it to avoid giving info of its UST holdings or buying/selling trends to the open market.

This is especially important now as China has widened the Yuan trading band. You wouldn't want excessive FX volatility to manifest itself as a result of your foreign-reserve management decisions being (mis)-interpreted by investment banks.

I'm not sure I see the problem. They let the biggest debt buyer cut out the middle man. I'm sure there was some backroom dealing going on there, but it seems like the biggest losers there are the middlemen who wound up getting cut out.

The middle man was getting a cut anyway. It was mainly to make China's purchases secrete.

  Primary dealers are not allowed to charge 
  customers money to bid on their behalf at Treasury    
  auctions, so China isn't saving money by cutting out 
  commission fees.

>make China's purchases secrete

Sometimes the typos are more fun than the whole thread.

they still aren't secret. stuff like this still shows up on treasury's stats.

If they were going through (presumably) private middle men, then were their purchases = a matter of public record in the first place?

I'm not sure I can articulate it very well, but my general point regards the access given to core functionality in both military hardware and finance. This doesn't really comport with the US's relationship to China that is portrayed in the mainstream.

Maybe they do not trust the FPGA's being supplied to Wall St.?

Does Wall St. check for backdoors in hardware?

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