Wall Street banks will profit again when Fed withdraws stimulus

Wall Street banks have been among the biggest beneficiaries of the pandemic-era trading, fueled by the Federal Reserve’s massive injection of cash into the markets.

The central bank is nearing the time to wind down its asset purchases, tapering, as banks are getting ready to profit again as increased volatility encourages clients to buy and sell more stocks and bonds.

The Fed has been buying up government-backed bonds since March 2020, adding $4 trillion to its balance sheet, as part of an emergency response to the COVID-19 pandemic.

The strategy was designed to stabilize financial markets and ensure companies and other borrowers had sufficient access to capital.

The top five Wall Street investment banks made an additional $51 billion in trading revenues last year and in the first three quarters of 2021, compared with the comparative quarters in the year prior to COVID, according to company earnings statements.