[throwlogon]

> Instead you [the bank] go to an anonymous arb firm, for $1m in bonds, and you say, "okay we're going to sell you the bond that is actually ours, you will sell it back to us, here is your fee, now we can sell this bond back to the client and wash the fact that it is ours."

How does the bank make money doing this? Routing the sale of this bond through the "anonymous arb firm" doesn't do anything to the price. If the bank's competitor is selling their bond at 1.00, the bank could directly offer their bond at 0.99 without getting "anonymous arb firm" involved. If the bank routes the trade through the "anonymous arb firm"... what difference does that make? If it shows up on the market at 1.01, the bank still has to give the client the 1.00 bond first, and if it shows up on the market at 0.99, the bank could have just done that itself.