Should the Federal Reserve Be Doing the Nation’s Work with a Skeleton Crew?

Source: Federal Reserve

Source: Federal Reserve

 

By Pam Martens and Russ Martens: August 3, 2017

The Federal Reserve Board of Governors is supposed to have a roster of seven Governors. It currently has four. Equally alarming, it lists just two members serving on each of its eight committees. One Fed Board Governor, Lael Brainard, is listed as one of the two members on six of the eight committees, or 75 percent of all committees. Governor Jerome Powell sits on five of the eight committees, or 63 percent of all committees.

The Fed’s Committee on Supervision and Regulation consists of just Powell and Brainard. And yet, this is what the Fed’s 2015 Annual Report describes as the institutions the Fed supervises:

4,922 Bank Holding Companies

442 Domestic Financial Holding Companies

470 Savings and Loan Holding Companies

839 State Member Banks

154 Foreign Banks Operating in the U.S.

Along with other entities per the graph above.

There has long been the suspicion that the Fed has farmed out much of its work of supervising the largest and serially malfeasant Wall Street banks to the Federal Reserve Bank of New York. There has also long been the suspicion that the New York Fed has grown too cozy with the banks it oversees to do the job properly. (See related articles below.)

The Trump administration appears intent on levitating the stock market by promising Wall Street more deregulation. The public must never forget that the Federal Reserve wore blinders and Congress sat on its hands as Wall Street spun out of control in a frenzy of speculative excess and corruption, leading to the greatest financial collapse from 2008 to 2010 since the Great Depression. Two-member committees at the Fed are a brazen affront to what this nation has been put through at the hands of Wall Street and its misguided regulators.

Related Articles:

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Is the New York Fed Too Deeply Conflicted to Regulate Wall Street?

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Trading Floor of the Federal Reserve Bank of New York; In Photos, Over the Years

Earnings Rise with Boost from Falling U.S. Dollar But Consumers Will Bear the Brunt of Rising Prices

S&P 500 Earnings Growth CY 2017 (Source: FactSet)

S&P 500 Earnings Growth CY 2017 (Source: FactSet)

By Pam Martens and Russ Martens: August 2, 2017

There seems to be an unlimited supply of methods in which the rich in America keep getting richer and the average Joe picks up the tab. (Think about the $16 trillion secret bailout of Wall Street by the Federal Reserve from 2007 to 2010 for the quintessential example.)

Yesterday, Fortune Magazine ran this sobering headline: “The Wealth Gap in the U.S. Is Worse Than In Russia or Iran.” The article quotes Richard Florida, author of The New Urban Crisis, as follows:

“Inequality in New York City is like Swaziland. Miami’s is like Zimbabwe. Los Angeles is equivalent to Sri Lanka. I actually look at the difference between the 95th percentile of income earners in big cities and the lower 20%. In the New York metro area, the 95th percentile makes $282,000 and the 20th percentile makes $23,000. These gaps between the rich and the poor in income and wealth are vast across the country and even worse in our cities.”

Against that backdrop comes news from FactSet last Friday that with 57 percent of the companies in the Standard and Poor’s 500 Index reporting actual earnings results for the second quarter of 2017, “ten sectors are reporting year-over-year earnings growth, led by the Energy, Information Technology, and Financials sectors.” FactSet adds this: “The only sector reporting a year-over-year decline in earnings is the Consumer Discretionary sector.” That would be the sector in which the average Joe lives.

Reuters has even more cheery news for the super rich who own the bulk of the shares of the S&P 500. The wire service reports that “The S&P 500 index is on track to post back-to-back, double-digit quarterly earnings growth for the first time in almost six years, and the trend could continue as a weak U.S. dollar and global growth help boost results.”

Unfortunately for the little guy, a weakening U.S. dollar causes price increases on imported goods from countries whose currencies have risen against the falling U.S. dollar. Add this to stagnating wages for the middle class, spiraling health care costs, the next generation buried under $1.325 trillion of student debt (much of it loaded onto their shoulders by the same Wall Street predators who crashed the U.S. financial system in 2008) and one can see why America might feel like Sri Lanka to many of its citizens instead of the much vaunted meritocracy that Wall Street titans like to portray to the rest of the world.

Income Inequality Graph from Robert Reich's Film, "Inequality for All"

U.S. Income Inequality Graph from Robert Reich’s Film, “Inequality for All”

Scaramucci: First Fired by Goldman Sachs, Now the White House

By Pam Martens and Russ Martens: August 1, 2017

Anthony Scaramucci

Anthony Scaramucci

Were it not for the profanity-laced tirade that Donald Trump’s briefly tenured Director of Communications offered up to a New Yorker reporter, it might be considered a badge of honor to get fired from both the great vampire squid, Goldman Sachs, and by the President whose administration is firmly ensnared in Goldman Sachs’ tentacles.

Wall Street veteran and hedge fund titan, Anthony Scaramucci, who was fired yesterday after a 10-day stint as Director of Communications for Trump’s White House, told reporter Courtney Comstock in 2010 at Business Insider that he had been “fired from Goldman a year and five months” into his tenure there as an investment banker. Scaramucci was rehired by Goldman a few months later, but in a sales position.

Scaramucci’s ties to Wall Street are extensive, including a stint as Managing Director at Lehman Brothers, the iconic investment bank which filed bankruptcy in September 2008 during the height of the financial crisis.

Scaramucci founded SkyBridge Capital in 2005 and in 2010 it purchased a hedge fund of funds from Citigroup, the behemoth Wall Street bank that received the largest bailout in U.S. history during the financial crisis.

In January of this year, SkyBridge Capital announced that it had agreed to sell a majority stake to RON Transatlantic and HNA Group, a Chinese conglomerate. Reuters reported yesterday that the sale is still “under review by the Committee on Foreign Investment in the United States, known as CFIUS.”

Bloomberg News reported on July 25 that Scaramucci was seeking a tax deferral on his huge stake in Skybridge as a result of joining the Trump administration. Federal law allows persons accepting a position in the executive branch to defer capital gains taxes if they are required to sell assets to avoid conflicts of interest while serving in government.

Former Goldman Sachs CEO, Henry (Hank) Paulson, immediately filed to sell a $500 million stake in shares of Goldman Sachs after his 2006 Senate confirmation to become U.S. Treasury Secretary in the George W. Bush administration. According to The Economist magazine, Paulson may have saved up to $200 million from the maneuver.

Can the Stock Market Continue Its Rise While the U.S. Dollar Slumps?

U.S. Dollar Index Versus Nasdaq Stock Market

U.S. Dollar Index (Green) Versus Nasdaq Stock Market (Orange) Over Past Six Months

By Pam Martens and Russ Martens: July 31, 2017

Back on January 12, 2017, Wall Street On Parade had a foreboding about the President-elect and his impact on the nation’s currency. We wrote at the time:

“The President of the United States is typically viewed as the person whose top job is to inspire confidence in the dignity, integrity and sanity of his leadership of the country. But the presser held by President-elect Donald Trump yesterday, the first in six months and likely viewed by world leaders around the globe, was short on confidence building and long on slandering the American media and U.S. intelligence agencies. In short order, the U.S. dollar took a dive. Trump has yet to assimilate the concept that his words no longer belong just to him but attach themselves like flypaper to the credibility of the most powerful nation on earth.”

This morning, reporters at Bloomberg News are also worrying about the sagging U.S. dollar, writing that “there’s no better place for investors to express their views about how a nation is managing its affairs than the $5.1 trillion-a-day global market for foreign exchange.” The article also notes that on July 20 of this year, when news reports surfaced that the Trump campaign/Russia investigation had expanded to include his personal finances, the U.S. dollar “immediately sank to an 11-month low. Just two days earlier, the currency slumped after a Republican effort to overhaul health care broke down.”

There’s an old maxim on Wall Street that the trend is your friend, meaning in this case that the downward thrust in the U.S. dollar could become a lasting trend under this President. This possibility has not escaped the Masters of the Universe on Wall Street. The Bloomberg article points out that: “Hedge funds are piling into bearish bets on the dollar, and now have the biggest net short position in four years.”

The trajectory of the U.S. dollar is on the same trajectory as President Donald Trump’s approval rating. According to Gallup, the President’s approval rating has gone from 45 percent on January 23, 2017 to 38 percent on July 29, 2017.

Contrasted sharply against this declining confidence is the behavior of the U.S. stock market averages this year, with the Dow Jones Industrial Average up 10.5 percent while the thundering herd of big tech stocks on the Nasdaq Stock Market have catapulted it to an 18.4 percent gain year-to-date.

Trading action on the Nasdaq last Thursday, however, was a potential harbinger of bad things to come. After setting a new record in the a.m. hours, the Nasdaq Composite tanked to an intraday loss of 104 points in the afternoon before paring that loss significantly by the close. The action looked like panic selling to many Wall Street veterans.

The panicky afternoon mood was heightened by the action in the Dow Jones Transportation Index on Thursday. Transports are widely seen as a measure of the nation’s future economic prospects as these are the companies that ship the nation’s goods to markets — a barometer of just how much consumer demand there is for these goods. Consumers in the U.S. represent two-thirds of Gross Domestic Product (GDP), thus their confidence in the leadership in Washington matters greatly.

Tomi Kilgore at MarketWatch summed up Thursday’s transport action as follows:

“The Dow Jones Transportation Average plunged Thursday toward its worst day in 13 months, with all 20 components contributing to losses. The index dropped 327 points, or 3.5%, the biggest point and percentage declines since it tumbled 351 points, or 4.6%, on June 24, 2016.”

Related Article:

U.S. Economy at Risk from Trump’s Poll Numbers

U.S. House Financial Services Committee Needs New Leadership

By Pam Martens and Russ Martens: July 12, 2017

Jeb Hensarling, Chair of the House Financial Services Committee, at FSOC Hearing, December 8, 2015

Jeb Hensarling, Chair of the House Financial Services Committee

When members of the U.S. House Financial Services Committee question Fed Chair Janet Yellen this morning following her testimony on monetary policy, many Republicans on the panel will be posturing for their money masters who fund their political campaigns rather than asking questions that benefit the average American.

You can tell that there has been a Koch Network-corporate takeover of the House Financial Services Committee by the statement that its Chairman, Jeb Hensarling, plastered on the front page of the Committee’s web site following the heroic actions of the Director of the Consumer Financial Protection Bureau, Richard Cordray, on Monday. Cordray reopened the nation’s courts to millions of Americans who have been the victims of predatory actions by the banks that fund Hensarling’s seat in Congress.

On Monday, Cordray went up against the most powerful players on Wall Street and the entire Big Bank lobby, and issued a final rule that restores the rights of citizens to sue predatory credit card companies and banks as a group in a legal technique known as a class action. Republicans in Congress should have heralded this move as a fundamental right under the U.S. Constitution and one of the very tenets on which this nation was founded.

One of the documents supposedly cherished by Republicans on the House Financial Services Committee is the U.S. Declaration of Independence. That founding document cites the tyranny of King George III and his infringement on access to the courts by citizens as a grievance. The founding fathers wrote that King George III “has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries” and, furthermore, he was “depriving us in many cases, of the benefits of Trial by Jury.”

The U.S. Bill of Rights’ Seventh Amendment to the Constitution guarantees the rights of citizens to access the nation’s courts. It reads:

“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.”

Hensarling didn’t see it that way. He posted a statement to the Committee’s web site that sounded like it had been quickly dashed off by corporate lobbyists. Using Orwellian Reverse-Speak, Hensarling called Cordray’s action “anti-consumer,” said it should be “thoroughly rejected by Congress,” and claimed “the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives.”

Americans certainly never envisioned that draining the swamp meant putting corporate billionaires and multi-millionaires in charge of the U.S. Treasury, State Department, Commerce Department, Education Department; putting former investment bankers from Goldman Sachs in key posts; and putting Wall Street’s lawyers in charge of Federal financial watchdogs. Donald Trump’s SEC Chair has represented eight of the ten largest Wall Street banks in the past three years. Millions of Americans have awakened to the sad reckoning that draining the swamp actually meant restocking it with more powerful players.

Hensarling has become a corporate mouthpiece because he is a product of America’s broken corporate campaign finance system. Wall Street powerhouse, JPMorgan Chase, is Hensarling’s largest political career donor, followed by another mega bank, Bank of America. Third on the list is the banking industry’s trade group, the American Bankers Association. Goldman Sachs, UBS, and Wells Fargo also rank in Hensarling’s top 20 career donors. Koch Industries, the sprawling international conglomerate that is majority owned by the Koch brothers, Charles and David, also made the list. This data comes from the Center for Responsive Politics which notes that “The organizations themselves did not donate, rather the money came from the organizations’ PACs, their individual members or employees or owners, and those individuals’ immediate families.” (Corporations are not legally allowed to donate directly to campaigns.)  

Increasingly, Congressional hearings chaired by these corporate-financed mouthpieces are productive viewing only to learn who has sold their soul outright and to get an early heads up on what new attack on citizens’ rights is in the works.