The Depository Trust the most powerful Trust in the world
By Melvin J. Howard
There are Trusts and then there is the Depository Trust Company.
The DTC is one of the best kept secrets. The average person has no clue that
this financial institution is the most powerful banking corporation in the
world. The general public has no knowledge of what the DTC is or what they do
and why would they? How can a private banking trust company hold assets close
to $40 trillion and be unknown? The
Depository Trust Company (DTC) is the world's largest securities depository. In 2009, DTC settled transactions worth more than $299 trillion,
and processed 299.5 million book-entry deliveries it retains custody of more
than 3.5 million securities issues worth almost $34 trillion, including
securities issued in the US and more than 120 foreign countries and territories.
The DTC is the largest limited trust company in the world. The DTC is a
brokerage clearing firm and transfer center. It’s a private bank for
securities. They handle the book entry transactions for all banks and brokers.
Every bank and brokerage firm must secure their membership with the DTC. Yes,
you read that correctly. The DTC is a private bank that processes every stock
and bond (paper securities) for all U.S. banks and brokerage houses. Just how
did this private bank and trust company get such a broad range of financial
power and clout? The DTC is a privately owned depository bank for institutional
and brokerage firms only. They process all of their book entry settlement
transactions. It's required by the Federal Reserve that DTC handle all
transactions". The Federal Reserve. The FED, as they are more commonly
called, mandates that the DTC process every securities transaction in the US.
It's no wonder that the DTC (including the Participants Trust Company, now the
Mortgage-Backed Securities Division of the DTC) can lend out a couple of
hundred billion here and there. The "DTC is partly owned by the New York
Stock Exchange on behalf of the Exchange's members. It is operated by a
separate management and has an independent board of directors. It is a limited
purpose trust company and is a unit of the Federal Reserve.
Now let’s see how the system works, you visit or call a stock
broker or bank and instruct them you want to purchase some shares of common
stock or a small municipal bond, for example. They will set up a brokerage
account for you and act as your agent with full durable power of attorney
(which you must legally sign over to them) to conduct business on your behalf,
upon your buy or sell instructions. The broker will place your stock or bond
purchase into their safekeeping under a "street name". The broker or
bank must then send the transaction to the DTC for ledger posting or book entry
settlement under mandate by the Federal Reserve System. Simply put, the
Depository Trust Company absolutely controls every paper asset transaction in
the United States as well as the majority of overseas transactions, and they
now physically hold ( as of 2009) 99% of all stock and bond book-entrys in
their street name. The DTC was created in 1973 as a user-owned cooperative for
post-trade settlement. Their members are banks and broker/dealers, whom I refer
to as participants. They handle listed and unlisted equities, including 60,000
equity issues and 270,000 corporate debt issues, equating to more than 78% of
shares outstanding on the New York Stock Exchange (NYSE). They also have more
than 95% of all municipals on deposit. All pension funds and other
institutional 'managed funds' are comprised of paper asset investments such as
stocks, bonds, and mutual funds. These certificates are technically in the name
of DTC's private holding company. The FED carries tremendous clout globally. Fed
Funds, or Fedwire, is a mighty weapon when it comes to smoothing out global
markets.
