Will Gary Cohn’s Departure Lead Trump to the Full Koch Agenda?

By Pam Martens and Russ Martens: March 7, 2018

Gary Cohn, First Director of the National Economic Council in the Donald Trump Administration

Gary Cohn, First Director of the National Economic Council in the Donald Trump Administration

Wall Street is losing its bedtime snuggly and comfort blanket in the White House. After a tortuous 14 months replete with crazy tweets from the President, Russia-probe indictments and guilty pleas, failure to talk Trump out of withdrawing from the Paris climate accord, revelations of hush money paid to a porn star by Trump’s personal attorney, and news of Trump campaign aides’ murky meetings with Putin operatives, Gary Cohn has finally called it quits over tariffs.

It’s not like Cohn, the former President of Goldman Sachs who became President Donald Trump’s first Director of the National Economic Council, didn’t understand Trump’s obsessive demand for loyalty. Cohn has watched for more than a year as those who didn’t show adequate subservience to the President were shown the door. In the case of the former FBI Director James Comey, he was not only fired by Trump but was then savagely ridiculed by the President as a “nut job” and a “grandstander.”

So Cohn had to know that when he mounted his own counter-offensive to the President’s tariff plan that he was in serious breach of the loyalty code enforced above all else by the leader of the “free” world.

The stock market’s reaction on Thursday, March 1 to the tariff announcement by Trump was to sell off by as much as 586 points before closing down 420. Trump then sent his pro-tariff advisers, Peter Navarro and Commerce Secretary Wilbur Ross, off to the airwaves to knock down concerns raised by his own party that the plan would trigger damaging trade wars against the United States.

Cohn then did the unthinkable. He effectively assembled his own team of anti-tariff executives to hold a meeting with the President to change his mind on following through with his plan to impose the tariffs on steel and aluminum, even with countries like Canada, Mexico and the European Union, who are U.S. allies. Cohn’s plan was for executives from automakers and beverage manufacturers who are heavy users of imported steel and aluminum and would be hurt by the tariffs, to meet with Trump tomorrow at the White House to make their strong counter arguments.

The unwritten loyalty oath clearly does not permit counter-offensives against the iron-will of the President. By last night, Cohn was out and the Thursday meeting he had planned was cancelled by the White House.

There is the possibility that Trump may have been goaded by negative television ads into his abrupt decision to move ahead with the tariffs. Just days before Trump made his tariff announcement on March 1, the Alliance for American Manufacturing began running a TV ad shaming the President for his unfulfilled campaign promises. The advertisement states:

“We heard the promises. Now it’s time for action. President Trump, America’s workers are counting on you to protect our jobs and to defend our national security. It’s time to keep the promise and to protect American Steel.”

After the news broke last evening after the stock market closed that Cohn would join an unprecedented exodus from the Trump administration, Dow futures were down more than 350 points. After about one minute of trading this morning, the Dow is down 309 points.

The name currently being circulated by the media as a potential replacement for Cohn is Larry Kudlow, a CNBC commentator with libertarian leanings. In 2011, Wall Street On Parade wrote about Kudlow’s conflicts with the Mercatus Center, a nonprofit heavily linked to funding by the billionaire Koch brothers. We wrote:

“One of those freedoms most treasured by the Koch brothers is their ability to see a research study done by one of their funded economics departments, then have its dubious data quoted from the mouth of a funded ‘news’ celebrity.  From 2002 through 2006, the Koch funded Mercatus Center paid Lawrence Kudlow, a CNBC co-host and later host of his own show, ‘The Kudlow Report,’ a total of $332,500 through his consulting arm, Kudlow & Co. LLC.  I obtained the information from public filings Mercatus made with the IRS.  It is not known if the Mercatus Center continued to pay Kudlow after 2006.  The Mercatus tax filings show $3.1 million paid in a line item called  ‘honoraria’ from 2001 through 2007.   Emails and phone calls to Kudlow, the CNBC legal department, and three communications executives of both CNBC and NBC/Universal were met with silence, despite a week’s lead time to respond.

“The Center for Public Integrity had this to say about the Mercatus Center in 2006:

“In 2005, Rep. Bob Ney, R-Ohio, whose office has accepted 19 trips from Mercatus — more than any other — introduced a bill to amend the Clean Air Act and require the secretary of energy to construct 15 new gasoline refineries and sell them to private businesses.  Mercatus has sought to weaken the act and spoken of the need for more refineries — both scenarios that could benefit Koch Industries.

“ ‘Neither the congressman nor his staff has ever had a single conversation with anyone from Mercatus about that bill,’ said Brian Walsh, communications director for Ney. ‘He introduced that bill to reduce America’s dependence on foreign countries for oil. We have not had a new refinery built in this country in over 20 years.’

“Mercatus spent at least $227,000 on more than 400 trips for lawmakers and their aides from 2000 through mid-2005. Most of this money appears to have been spent on the group’s annual retreat for congressional chiefs of staff, who are often put up in posh hotels near Washington and attend seminars on public policy.

“While Congress is in session Mercatus also conducts regular seminars in congressional office buildings, where staffers are offered free meals and given lectures on issues such as health care, telecommunications regulation and tort reform.

“ ‘There is no conceivable argument of why this group has not registered to lobby. They have met the threshold that makes them a lobbying group,’ said [Craig] Holman of Public Citizen… ‘The Mercatus Center does not engage in lobbying,’ Carrie Conko, the organization’s communications director, said in a written statement for this story.”

In 2016, Wall Street On Parade took another hard look at the right-wing front groups that were heavily involved in the Trump campaign.

In late February, Lee Fang and Nick Surgey, writing for The Intercept, revealed a secret memo from the Koch brothers’ sprawling network of wealthy donors, which lauded the major objectives it has achieved under Trump.

If Kudlow or a similar Koch agenda devotee replaces Cohn, there may be no stopping the Kochs from consolidating their power in the White House.

Boeing Is the Elephant in the Room in Trump’s Tariff War

By Pam Martens and Russ Martens: March 6, 2018

President Donald Trump Berates the Media in a Hastily Called Press Conference on February 16, 2017

President Donald Trump 

On January 20, 2017, the date of Donald Trump’s inauguration as President of the United States, the giant aerospace company, Boeing, closed the trading day at $159.53. Yesterday, it clocked in at $352.75 by the closing bell. The Trump era has added 122 percent to the pockets of Boeing shareholders, giving it a market cap of $207.6 billion.

Trump’s erratic reign had been good for Boeing – right up until Thursday, March 1, when Trump announced that he would be imposing 25 percent tariffs for foreign-made steel and 10 percent for aluminum. The stock market took a dive along with Boeing on the announcement.

Boeing is not just your average publicly-traded stock. It’s one of the 30 components in the Dow Jones Industrial Average, which is an index that affords greater weight to a stock based on its price. At yesterday’s closing price of $352.75, Boeing is by far the most expensive stock in the Dow. As such, it has a weighting of 9.76 percent of Dow performance. That compares with GE, the cheapest stock in the Dow, which registered a closing price of $14.42 yesterday and has a minuscule weighting of 0.40 percent in the Dow.

Trump has been a serial Tweeter about how his presidency has buoyed the Dow. Now, ironically, his steel and aluminum tariffs could be the undoing of that blissful relationship – in no small part because of Boeing’s precarious situation in the midst of a full blown trade war.

The problem isn’t that Boeing will see its aluminum costs for its planes rise dramatically. Morningstar analyst Chris Higgins notes the following in that regard:

“We expect no material impact on Boeing’s costs from tariffs. First, steel exposure is minimal: steel (25% tariff under Trump’s plan) accounts for about 15% of weight on older aircraft and around 10% on newer models. According to Alix Partners, a consulting firm, aluminum accounts for 79% of the weight of the 737. However, aerostructures represent roughly 30% of aircraft costs, meaning that if 100% of the 10% tariff hits Boeing, we estimate the airframer will experience only a 2.5% cost increase. We’d note that customer contracts contain escalation clauses, which means Boeing might be able to pass through the increase. Newer aircraft, the 787 for example, use about 20% aluminum as a percentage of weight, making the impact more negligible.”

Boeing’s potentially serious problems reside elsewhere. Boeing is America’s largest manufacturing exporter and derives 55 percent of its revenues from foreign countries. According to Boeing’s website, it has a backlog of half a trillion dollars in orders. Morningstar analyst Higgins estimates that while Boeing’s official figures show Chinese orders at just 304 aircraft, he believes that “over 70% of the 1,090 of unidentified orders on Boeing’s books will be delivered to Chinese customers (airlines and lessors),” giving China about 20 percent of Boeing’s total backlog. (Boeing concedes on its website that some of its customers have asked for anonymity on their orders.)

In dollars and cents, that would mean that about $100 billion of Boeing’s backlog rests on the relationship and goodwill it has with China. Just last November, Boeing signed a $37 billion deal in China for 300 airplanes.

Bloomberg’s David Fickling reported on March 2 why a tariff war with China could not come at a worse time for Boeing. Fickling writes:

“China Inc. has a sound, self-interested rationale for pursuing an aggressive path. Commercial Aircraft Corp. of China Ltd., or Comac, is hoping to pitch its C919 jet as a homegrown competitor to Boeing’s 737 and Airbus’ A320, and it announced last month that it would make its first delivery in 2021.

“Using a trade war to put one of the C919’s rivals on the back foot seems the perfect way to crack open the Boeing-Airbus duopoly and advance the interests of China’s own manufacturers. Should the current tit-for-tat over steel and aluminum spiral toward a trade war, few firms will find themselves in a more precarious position than Boeing.”

It’s not only the Dow Jones Industrial Average that could be at stake in a retaliatory trade war. Real jobs could be at stake as well. Boeing currently employs over 141,000 people with 50,000 factory jobs and more than 45,000 engineers. Its largest employment bases are in Washington state with more than 65,000 jobs; California with more than 12,000 jobs; and Missouri with more than 13,000 jobs.

Boeing manufactures the 737, 747, 767, 777 and 787 families of airplanes with new product developments including the Boeing 787-10 Dreamliner, the 737 MAX, and the 777X.  The company reports that “more than 10,000 Boeing-built commercial jetliners are in service worldwide, which is almost half the world fleet.” The company is also a major manufacturer of freighters, reporting that “about 90 percent of the world’s cargo is carried onboard Boeing planes.”

Boeing’s domestic workforce is not the end of the story either. The company says that in 2016, it paid “nearly $45 billion to more than 13,600 businesses, supporting an additional 1.3 million supplier-related jobs in the United States.”

The giant aerospace company clearly does not want a trade war with China. But it’s up against some powerful people who have the President’s ear. Just days before Trump made his steel and aluminum tariff announcement, the Alliance for American Manufacturing began running a TV ad shaming the President for his unfulfilled campaign promises. (See video below.) The ad says:

“We heard the promises. Now it’s time for action. President Trump, America’s workers are counting on you to protect our jobs and to defend our national security. It’s time to keep the promise and to protect American Steel.”

The question is whether the President and his advisers have carefully thought through the ramifications to the U.S. economy of a retaliatory tariff war.

Democrats Gutting Wall Street Reform? Follow the Money.

Systemic Risk Among Deutsche Bank and Global Systemically Important Banks (Source: IMF --  "The blue, purple and green nodes denote European, US and Asian banks, respectively. The thickness of the arrows capture total linkages (both inward and outward), and the arrow captures the direction of net spillover. The size of the nodes reflects asset size.")

Systemic Risk Among Deutsche Bank and Global Systemically Important Banks (Source: IMF — “The blue, purple and green nodes denote European, US and Asian banks, respectively. The thickness of the arrows capture total linkages (both inward and outward), and the arrow captures the direction of net spillover. The size of the nodes reflects asset size.”)

By Pam Martens and Russ Martens: March 5, 2018

Today’s front page of the print edition of the New York Times has articles on the Oscars, the election in Italy, Ben Carson’s reign at HUD and the death of an elderly Briton who once broke the four-minute mile among numerous other less than urgent news pieces. What it does not have on its front page is any headline showing concern that the seminal piece of Wall Street reform legislation of the Obama era, which already has enough loopholes to set off champagne corks on K Street, may be dismantled this week by a vote in the Senate. The move would come in the midst of the 10th anniversary of the greatest Wall Street collapse and economic catastrophe since the Great Depression, both of which were underpinned by casino capitalism — Wall Street banks making obscenely leveraged bets for the house while holding Mom and Pop deposits.

This is now the new normal at the New York Times with its editorial page editor declaring in December at a staff meeting that the paper is “pro-capitalism.” This is really code for “Wall Street is our home-town team and we’re not going to bite the hand that feeds us” – even if it means intentionally rewriting the facts on what actually caused the Wall Street crash.

Instead of calling front page attention to the ongoing critical threat to the nation’s financial system and providing an in-depth analysis of how Wall Street has already whittled down the 2010 Dodd-Frank financial reform legislation by a thousand cuts, the Times buried its tepid article on page B1under the headline: “Big Banks May Weaken Dodd-Frank Oversight.”

Citigroup was the poster child of the 2008 financial crash. It had loaded up on dodgy off-balance sheet “assets,” lied about its subprime debt exposure, and then received the largest taxpayer bailout in U.S. history. In December 2014 Congress allowed Citigroup to take a chain saw to Dodd-Frank. Citigroup pushed through a measure in the must-pass spending bill to keep the government running that allowed it and the other biggest banks on Wall Street to keep their riskiest assets – derivatives – in the commercial banking unit that is backstopped with FDIC deposit insurance. The taxpayer-subsidized deposit insurance allows the mega banks to get a higher credit rating than they would otherwise receive while paying pathetically low interest rates to savers on those deposits. By holding tens of trillions of dollars in derivatives on their respective commercial bank books, the mega banks are perceived as too-big-to-fail and can put a gun to the head of taxpayers for another bailout the next time their risky bets fail. All of these tricks are effectively public subsidies of a banking system gone mad.

The situation with the anticipated vote this week in the Senate is so critical that Senator Elizabeth Warren has released a video about the threat on YouTube. (See video below.) Warren says in the video that the proposed legislation “takes about 25 of the 40 largest banks in this country and just moves them off the special watch list and treats them like they were tiny little community banks that just couldn’t do any harm to the economy.” Warren adds: “Those exact same 25 banks that are being taken off the watch list got about $50 billion in taxpayer bailout money during the last crash.”

The 25 banks would be removed from the watch list through changes to Dodd-Frank Section 401. At present, any bank with over $50 billion in assets is subject to enhanced requirements like extra capital, liquidity, stress tests and monitoring of risk management protocols. The proposed legislation raises the asset threshold to a stunning $250 billion – a mega bank by any rational interpretation.

Three of the banks that would be exempted under the legislation are U.S. bank holding companies of mega foreign banks: Deutsche Bank, UBS and Credit Suisse. All three have been serially fined for running afoul of U.S. banking laws. And Deutsche Bank stands out for its potential to amplify financial contagion in the U.S.

In June 2016, Deutsche Bank was the subject of a report issued by the International Monetary Fund (IMF). The report looked at the “Financial System Stability” of German financial institutions and examined the systemic impact that a major bank blowing up would have on other domestic German banks and insurers as well as its ability to set off financial contagion in other countries – most likely because it is a major counterparty to derivatives at global banks. The report concluded that spillover effects would not be limited to Germany but would impact France, the United Kingdom and the United States.

The alarming report called out Deutsche Bank as “the most important net contributor to systemic risks.” (See chart above.) The IMF findings included the following:

“Notwithstanding moderate cross-border exposures on aggregate, the banking sector is a potential source of outward spillovers. Network analysis suggests a higher degree of outward spillovers from the German banking sector than inward spillovers. In particular, Germany, France, the U.K. and the U.S. have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country…

“Among the G-SIBs [Global Systemically Important Banks], Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse. In turn, Commerzbank, while an important player in Germany, does not appear to be a contributor to systemic risks globally. In general, Commerzbank tends to be the recipient of inward spillover from U.S. and European G-SIBs. The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime.”

The proposed legislation in the Senate is S.2155 which carries the Orwellian reverse-speak title of “Economic Growth, Regulatory Relief, and Consumer Protection Act.” It was introduced by Republican Senate Banking Chair Mike Crapo and currently has 25 co-sponsors, including 12 Democrats. Hillary Clinton’s former running mate for Vice President, Tim Kaine, is among the Democratic co-sponsors, as is his fellow Senator from Virginia, Mark Warner. Kaine is currently running for re-election and has received large contributions from Big Law partners that represent Wall Street. Warner’s last campaign in 2014 included among his 20 largest donors the mega Wall Street banks Goldman Sachs and JPMorgan Chase. Goldman’s employees and PACs gave Warner’s campaign $71,600 while JPMorgan Chase gave the Warner campaign committees $50,566 according to the Center for Responsive Politics.

In addition to Kaine and Warner, other Democratic senators who are co-sponsoring the legislation are: Tom Carper (Delaware), Chris Coons (Delaware), Joe Donnelly (Indiana), Heidi Heitkamp (North Dakota), Jon Tester (Montana), Claire McCaskill (Missouri), Joe Manchin (West Virginia), Gary Peters (Michigan), Michael Bennet (Colorado) and Doug Jones (Alabama).

Senator Heidi Heitkamp is also up for reelection this year and her number one contributor at present is employees and/or PACs of Goldman Sachs which have contributed $79,500 thus far.

Senator Joseph Donnelly will also be attempting to keep his Senate seat this year. His largest campaign donor by a huge margin is Votesane PAC which has kicked in $265,887. The PAC was founded by Rob Zimmer whose LinkedIn profile says he is presently a consultant to the financial services industry.

Citigroup’s Loan to Kushner: The Devil Is in the Details­­­ of Citi’s Sordid History

By Pam Martens and Russ Martens: March 1, 2018

Jared Kushner, Senior Advisor and Son-In-Law to President Trump

Jared Kushner, Senior Advisor and Son-In-Law to President Trump

Last evening, the front page digital edition of the New York Times dropped another bombshell in what increasingly feels like a badly scripted daily soap opera that could perhaps be called “As the White House Turns” or “Days of Our Messed Up Lives.”

The Times report focused on big loans that were made to Jared Kushner’s family business by two financial firms after he met at the White House with executives from those firms. There was a $184 million loan from private equity firm Apollo. There was also a $325 million loan by mega Wall Street bank Citigroup shortly after a visit by Citigroup’s CEO Michael Corbat to Kushner’s office at the White House in the spring of 2017.

Despite nepotism laws governing the Executive Branch, Kushner is both the son-in-law to President Trump as well as a Senior Advisor. Despite White House ethics rules, Kushner continues to own a big chunk of Kushner Companies, the family’s sprawling real estate business. The Times’ article puts his ownership stake at “as much as $761 million.” The Times notes an additional conflict: that while Kushner is the point man for Middle East policy “his family company continues to do deals with Israeli investors.”

Kushner is also the fellow who, according to May 2017 reports in the Washington Post and New York Times,  met with Russian Ambassador Sergey Kislyak to attempt to set up a secret back channel of communications with Russians when he was part of the Trump transition team. According to an intercepted communication by U.S. intelligence officials, Kislyak reported back to Russia that Kushner had suggested using Russian diplomatic facilities located in the U.S. for these secret chitchats. Despite this, Kushner amazingly continued to be allowed to review Top Secret documents as part of his Senior Advisor role to the President.

Kushner’s Top Secret clearance has now been stripped and according to media reports, is now less than that of the White House calligrapher.

Wall Street On Parade has extensively reported in the past on the dubious dealings of Citigroup in Washington. Citigroup is the bank that pressured the Bill Clinton administration into repealing the depression-era Glass-Steagall Act in 1999. That act had prevented Wall Street’s speculating investment banks and brokerage firms from owning commercial banks that take in FDIC insured deposits in order to prevent another 1929-1932 style Wall Street crash. Just nine years after the repeal of Glass-Steagall, Wall Street experienced another epic crash, with Citigroup playing a major role in the contagion. Citigroup received the largest taxpayer bailout in U.S. history, taking in $45 billion in equity from the U.S. Treasury; a government guarantee on $300 billion of Citigroup’s dubious assets; the Federal Deposit Insurance Corporation (FDIC) guaranteed $5.75 billion of its senior unsecured debt and $26 billion of its commercial paper and interbank deposits; and the Federal Reserve secretly funneled $2.5 trillion in almost zero-interest loans to units of Citigroup between 2007 and 2010.

Citigroup was created by the merger of Citicorp (parent of Citibank) and Travelers Group (which owned the Wall Street investment bank Salomon Brothers and the brokerage firm Smith Barney). It would not have been allowed to exist but for the largess of the Clinton administration. And the Clintons needed a lot of financial help when they exited the White House. In a June 9, 2014 interview with ABC’s Diane Sawyer, Hillary Clinton said this: “We came out of the White House not only dead broke, but in debt. We had no money when we got there, and we struggled to, you know, piece together the resources for mortgages, for houses, for Chelsea’s education. You know, it was not easy.”

One institution that had big confidence in the Clintons’ future earning power was Citigroup. As we reported in 2014:

“According to PolitiFact, Citigroup provided a $1.995 million mortgage to allow the Clintons to buy their Washington, D.C. residence in 2000. That liability does not pop up on the Clinton disclosure documents until 2011, showing a 30-year mortgage at 5.375 percent ranging in face amount from $1 million to $5 million from CitiMortgage. The disclosure says the mortgage was taken out in 2001.

“Citigroup also paid Bill Clinton hundreds of thousands of dollars in speaking fees after he left the White House. It committed $5.5 million to the Clinton Global Initiative — a program which brings global leaders together annually to make action commitments. Citigroup employees have also been major campaign funders to Hillary Clinton’s political campaigns.”

Then there is that strange employment agreement and mortgage deals that Citigroup had with Jack Lew, who became President Obama’s second U.S. Treasury Secretary after serving as his Chief of Staff. (Lew had been the Director of the Office of Management and Budget in the Clinton administration.)

During Lew’s Senate confirmation hearing to become U.S. Treasury Secretary, it emerged that Citigroup (a prior employer) had paid him a bonus of $940,000 in 2009 (effectively out of public funds since it was insolvent at the time and receiving a taxpayer bailout) on the contractual pre-condition that he would secure a “full time high level position with the United States Government or a regulatory body.”

On January 14, 2013, just four days after Lew was nominated for Treasury Secretary, Citigroup again modified a home mortgage held by Lew, giving him a highly attractive interest rate of 3.625 percent for a 30-year mortgage of $610,000 and simultaneously providing a $200,000 home equity loan at an unstated amount of interest.

Citigroup is one of the major reasons that a controlling wing of the Democratic Party has become known as the Wall Street Democrats. Nothing drove this point home more forcefully than the release of emails from the Obama campaign by WikiLeaks in October 2016. Those emails showed that President Obama, using the email address of bobama@ameritech.net, was communicating in 2008 directly with Michael Froman, an executive of Citigroup, who fed Obama lists of recommended appointments to his cabinet,  while the serially charged bank was collapsing and in the midst of receiving the largest taxpayer bailout in history.

In an email from Froman dated October 6, 2008, with Froman using his Citigroup email address of fromanm@citi.com, Hillary Clinton appears on Froman’s list for Secretary of State or head of the U.S. Department of Health and Human Services (HHS). In a separate list attached to the email, Eric Holder is recommended by Froman for U.S. Attorney General at the Department of Justice or as White House Counsel. (Scroll down to see the email and the attachments here.)  In less than a month after Obama’s election as President on November 4, 2008, Obama had nominated Clinton to be his Secretary of State and Holder as his Attorney General. Holder failed to prosecute any of Wall Street’s top executives for the crimes that led to the greatest financial crash since the Great Depression.

But Citigroup’s Froman was not just involved in recommending top level cabinet appointees. He was also overseeing rank and file positions. In an email dated Saturday, October 18, 2008, Froman, again using his official Citigroup email address, sent the following email to Obama’s advisers, according to the emails leaked by WikiLeaks, which have not been disputed by the Obama camp:

“Review Teams

“Attached is the latest version of the Agency Review teams. It is a closely held document, so please treat it with the same sensitivity as ours. If you all could take a quick look at the lists for the agencies in your area, that would be helpful. I think the hope is that, while there are no guarantees, some of the people on these lists might make their way into the agencies ultimately. Our role, therefore, is to check whether there is much overlap between the names here and the names were seeing/generating for sub-cabinet positions in each agency. There doesn’t need to be total overlap, but if there is a total disconnect, it would probably be better to rectify that now vs. later.

“I hate to ask, since I just send you another long spreadsheet to check, but if you could do this tomorrow and get back to Lisa (copied here) and myself, that would be great. Thanks.”

Early in Obama’s first term, Froman was appointed as Deputy Assistant to the President and Deputy National Security Adviser for International Economic Affairs. Later, Froman became U.S. Trade Representative and the man behind the highly controversial and highly secretive Trans-Pacific Partnership trade deal.

And, finally, there is the question of what Citigroup might have wanted from the Trump administration in the spring of last year as it provided that $325 million loan to the Kushner Companies. The Justice Department had charged Citigroup on May 20, 2015 with a criminal felony count for its participation in the cartel that was rigging foreign currency markets. At that time, Citigroup was already considered a recidivist bank – repeatedly being charged and fined by its regulators.

In the spring of last year, the Justice Department had an open investigation of a unit of Citigroup over serious money laundering charges. A prior felon being charged just two years later with money laundering should have resulted in prosecution or being charged with a felony count.

Instead, on May 22, 2017, the Justice Department’s Acting Assistant Attorney General, Kenneth A. Blanco, announced that Banamex USA, the unit of Citigroup under investigation, was being given a non-prosecution agreement and forfeiting a meager $97.44 million while it simultaneously agreed to criminal violations for “willfully failing to file Suspicious Activity Reports (SARs).” SARs are one of the most basic procedures that U.S. banks employ to guard against money laundering. And yet, the Justice Department found the following at Banamex USA:

“According to admissions contained in the NPA [non-prosecution agreement] and the accompanying statement of facts, from at least 2007 until at least 2012, BUSA [Banamex USA] processed more than 30 million remittance transactions to Mexico with a total value of more than $8.8 billion. During the same period, BUSA’s monitoring system issued more than 18,000 alerts involving more than $142 million in potentially suspicious remittance transactions. BUSA, however, conducted fewer than 10 investigations and filed only nine SARs in connection with these 18,000-plus alerts, filing no SARs on remittance transactions between 2010 and 2012.”

It’s quite clear that Trump has no intention of draining the swamp in Washington. The question remains if Mueller and his team will dig down deep enough to purge more than just a superficial layer.

Related Articles:

Russian Bank Chairman Met With Kushner, Citigroup and JPMorgan Chase

A Private Citizen Would Be in Prison If He Had Citigroup’s Rap Sheet

As Citigroup Spun Toward Insolvency in ’07- ’08, Its Regulator Was Dining and Schmoozing With Citi Execs

Stockman: $1.8 Trillion in New Treasury Debt Will Hit Bond Pits “Like a Tornado”

By Pam Martens and Russ Martens: February 28, 2018

David Stockman on CNBC, February 27, 2018

David Stockman on CNBC, February 27, 2018

Investors have been whiplashed so far this week and it’s only Wednesday morning. On Monday, the Dow rocketed ahead by 399 points. On Tuesday, it plunged by 299 points. What changed investor sentiment so dramatically in 24 hours?

David Stockman, the former Director of the Office of Management and Budget under President Ronald Reagan who blogs at Contra Corner, appeared on CNBC yesterday to size up the situation. Commenting on the new Chairman of the Federal Reserve, Jerome Powell, who gave testimony for the first time in his new role before the House Financial Services Committee yesterday, Stockman said he thinks Powell is “missing three giant skunks sitting on the wood pile.”

The biggest skunk according to Stockman is an “epic monetary fiscal collision” that Stockman says he hasn’t seen before in his lifetime. Stockman explained that starting this October, which begins the Federal government’s Fiscal 2019,  the government is going to borrow $1.2 trillion. Stockman called this “an astronomical number” given that the U.S. is ten years into an expansion. (Borrowing of that magnitude has traditionally been done only during a deep recession.)

At the same time says Stockman, the Federal Reserve has pivoted to Quantitative Tightening (QT) “and they will be dumping $600 billion” of their bonds into the market at the same time as the government is pumping up debt issuance. (The Federal Reserve began trimming back its purchases of Treasury bonds in October of last year in order to normalize its bloated balance sheet that resulted from the financial crisis. That trimming, which is an effective tightening of monetary policy, will expand this year.

The Fed’s $600 billion combined with the $1.2 trillion from the government means that $1.8 trillion in Treasuries “will be looking for a home” in Fiscal 2019 said Stockman. This leads Stockman to believe that the market simply can’t clear all of this debt at anywhere near the 2.90 percent interest rate at which the 10-year U.S. Treasury has been trading. He says there is going to be a “monumental yield shock” that will take 10-year Treasury yields to 3 to 4 percent “and probably overshoot beyond that.”

Another big skunk explains Stockman is that there will not be the help coming from other central banks around the world as there has been in the past decade. They’re also in wind-down mode.

In his House testimony yesterday, Powell rattled markets by using the words “robust” to describe the job market and “more stimulative” to describe fiscal policy. He also said that “wages should increase at a faster pace.” The full context was as follows in his written testimony:

“The robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment. Moreover, fiscal policy is becoming more stimulative. In this environment, we anticipate that inflation on a 12-month basis will move up this year and stabilize around the FOMC’s 2 percent objective over the medium term.

“Wages should increase at a faster pace as well. The Committee views the near-term risks to the economic outlook as roughly balanced but will continue to monitor inflation developments closely.”

All of this happy chatter was anathema to the stock market which interpreted it to mean that the Fed will be moving ahead with rate hikes sooner rather than later. Higher rates on Treasury notes and bonds spell competition for the low dividend yield on quality stocks.

The bottom line here is that the future of the stock market rests in the hands of the bond market.