Private Placement Program

A constant theme running through the global non-bank finance market as it has evolved since the 2008 crash, has been private placement and buy/sell programs. Sadly, the whole sector has become tainted as unscrupulous individuals, with no real knowledge of how it operates, have persuaded the unaware to part with significant sums of money with the expectation that they were going to reap outstanding returns. So prevalent did these scams become that the FBI and other agencies actually put out warnings that these programs are, in themselves, a scam. Blame the internet, it’s the cause of much grief in the market generally! It’s probably true to say that less than 1% of what’s on offer on the internet is real. But, nevertheless, it is a genuine, private ‘Tier-1’ marketplace where financial instruments of many types (mostly MTNs) are transacted by independent traders and trading groups, operating across the world’s to top tier banks.

In the 1990s, the trading in bank instruments was and is presently a multitrillion dollars industry worldwide. The World’s largest Holding Companies of North American and European Banks are authorized to issue blocks of debt instruments such as medium-term notes, debenture instruments, and standby letters of credit at the behest of the United States Treasury for the United States Treasury Trust and Foundations and the United States Federal Reserve. The Instruments issued are backed by a Treasury undertaking. The genesis of this marketplace was the 1944 Bretton Woods Conference of world leaders. The principles originally championed as answers to post-World War II economic stability are still the impetus for the operation of these transactions today. These transactions started some fifty years ago, have grown, and have been continuously modified, and as described in this article are Private Placement U.S. Treasury and Federal Reserve investment transactions administered by select Western Banks. A brief history will help to understand the origin of these transactions and how it has remained strong and viable despite the great economic changes the world has experienced over the last half-century.

With World War II had come to a close, the leading political and economic authorities of the world met in Bretton Woods, New Hampshire (USA). Their purpose was to formulate a common plan to rebuild the war’s massive devastation and to impose global restraints upon forces that had twice led to world chaos during the first half of the Twentieth Century and left economic collapse in its wake. To accomplish this goal, these leaders sought to empower universally recognized international institutions capable of effectuating and preserving political order and capable of encouraging and facilitating world economic trade and cooperation.

Leading economists around the world advocated the creation of an international banking system that would administer a universally accepted “currency”. It was believed that a centralized global authority, and a standard world currency, with fixed exchange rates between the different currencies of the world, was the formula for stimulating growth and maintaining world economic stability. The Bretton Woods Conference was held on July 1, 1944, with more than 700 participants representing 44 countries coming together and advocating for the establishment of an international banking system. The English economist John Maynard Keynes called for the adoption of a standard currency. However, the political realities of state autonomy have inevitably prevented the adoption of a uniform currency. As an alternative, international leaders have decided to adopt the US dollar as the standard global currency for international trade. It was backed by gold and the most stable currency. This adoption of the US dollar as the standard currency of international trade was the cornerstone that triggered the development of the banking instrument market. The Bretton Woods Conference also gave birth to the United Nations, the World Bank, the International Monetary Fund (IMF), and the Bank for International Settlements (BIS). The World Bank was structured to operate in a manner consistent with traditional commercial banks. It was created to serve as a lender to the poorest and least developed countries. World Bank funding came from the evaluation of the most industrialized countries. Today, it receives deposits from more than 140 member governments and lends to the least developed countries in need of international capital.

In its attempt to further solidify the universal acceptance of the U.S. Dollar as the standard world currency, the Bretton Woods Conference had fixed the price of Gold backing the U.S. Dollar at $35.00 an ounce. During the 1950s and the 1960s, the price of gold in the open market had increased to a price nearly ten times that amount. The need to back the U.S. Dollar with gold valued at $35.00 an ounce while simultaneously providing sufficient U.S. Dollars to accommodate the increased needs of the international marketplace created significant stress on the United States Monetary system. The United States did not have enough gold to continue issuing the dollars necessary to continue supporting international economic expansion. On August 15, 1971, facing a threatened speculative run on the U.S. gold reserves, President Richard Nixon renounced America’s promise to convert paper dollars into gold upon demand. With this executive proclamation, the United States abandoned the gold standard. In the absence of the gold-backed standard currency, the idea of fixed exchange rates among all currencies of the world became passed, and by 1973 the IMF, the World Bank, and the Bank of International Settlements had abandoned the idea of fixed exchange rates. Within the territorial limits of the United States, the U.S. Federal Reserve exerts influence upon the domestic economic trends by the regulation of domestic bank reserve requirements and the adjustment of the Federal Discount Rate. While these may be internally effective tools, they are inadequate to provide the international control demand in the global marketplace. The United States Treasury expanded the role of the Federal Reserve System to monitor the International markets separate and apart from domestic duties. 

The US Treasury needed to find a solution to continue creating US Dollars, so it created financial instruments, mainly Medium Term Notes (MTN)*, which it sold to major global banks. The US Treasury through the validation of the Federal Reserve issues the largest financial instruments to the issuing banks of the World Bank in US dollars. These transactions are economically important because the banking instruments have such large dollar amounts that the effect of these sales will have a direct impact on the volume of the US dollar in circulation. Once the Federal Reserve cash out the sale of financial instruments in dollars, they can be reintegrated into targeted segments of the global economy in accordance with the US Treasury and policies determined by the G8 countries. The big world banks exchange their financial instruments. Private Placement Programs (PPPs) are born …But reserved only for banks and governments… * Medium Term Notes are negotiable debt securities with an interest rate. They are issued by governments or companies in international debt markets to finance their medium and long-term capital needs.

This solution is very advantageous economically and financially for everyone, and it’s something magical … we always win upwards or downwards … if the economy of a country is growing, we win in positive speculation, if the economy of a country collapse, the debt is erased … but the US Dollars were created meanwhile … everyone wins … There is so much to gain from this system, that the banks have started to want to use this system to launder their own liquidity, and those of some of their clients obtained more or less in the legality (not respecting oil embargoes, money laundering. …). Remember the file of HSBC a few years ago. Banks will therefore organize, and create “subsidiaries” so-called “trading platforms”. They will offer their large clients to invest in programs through its platforms. The money returns gray and spring white with huge profits validated by the Federal Reserve (FED). But in this case, if there is any doubt about the origin of the funds, the Federal Reserve (FED) validates the transaction only if a part of the profits generated is donated to a humanitarian foundation, or a government project is always humanitarian.