by Mathew Katz

Wall Street banks are making serious money by trading with the Federal Reserve, the Financial Times reports. The Fed has become one of the biggest buyers of securities since the financial crisis hit, since doing so helps to stabilize markets and keep interest rates low. Unlike private buyers, however, the Fed announces specific securities purchases in advance in the interest of transparency. The second an announcement is made, traders can stockpile them for sale to the Fed at a jacked-up price. This gives the upper hand to Wall Street, according to one investment firm executive:

You can make big money trading with the government. The government is a huge buyer and seller and Wall Street has all the pricing power.

On the one hand, this is just another way for the Fed to provide even more support for banks. On the other hand, considering it's spending taxpayer money, former U.S. Treasury officials tell the paper the Fed could drive a harder bargain.