At least four major banks reportedly were competing for what is believed to be the largest custody contract ever: the Treasury Department's $700 billion rescue of the nation's financial institutions.
At deadline on Oct. 10, Treasury Department officials had not revealed the winner, even though that bank was supposed to be ready to launch operations the next day.
JPMorgan Chase & Co., New York, with more than $15 trillion under custody, was the front-runner, sources said. The other contenders: Bank of New York Mellon Corp., New York, with $23 trillion under custody and administration; State Street Corp., Boston, $15.3 trillion under custody; and Northern Trust Corp., Chicago, $4 trillion under custody.
Spokesmen for all of the companies declined comment.
Under the Treasury Department's extremely compressed request-for-proposals process for the mammoth custodial operation, all interested parties had to file their bids within two days of the solicitation's announcement last week.
The process was quick because Treasury officials want to start buying the illiquid assets as soon as possible to relieve the credit crisis that is hobbling the U.S. economy.
Along with performing the usual custodial functions for the assets, the Treasury's RFP also charges the winning applicant with tagging, or tracking, the assets acquired, conducting the reverse auctions that will be used to acquire the assets, and monitoring any third parties involved to ensure their actions comply with stringent federal guidelines.
Sources close to the application process said it was hard to say how big of a payday the selected company would get from the custody operation. In an average custody operation involving assets of more than $100 billion, fees usually are less than one basis point. But in this case, the contract calls for services that aren't usually included in custody operations, including the auctions, valuing the assets and asset tracking.
“Yes, it's about safekeeping, but more than safekeeping, it's about valuation and reporting,” said a source familiar with the bidding process, who asked not to be identified.