By Pam Martens and Russ Martens: December 24, 2020 ~
Merry Christmas Eve 2020 and welcome to a rerun of the roaring 20s, complete with one-termer President Herbert Hoover in the White House, Wall Street running wild with unchecked corruption, and unprecedented income inequality.
On Saturday, Bloomberg News attempted to outline the key components of markets gone bonkers “in this year of death, disease and economic calamity,” writing that the “Mania is laid bare in IPO surge, options boom and crypto fever.”
In fairness, the nine reporters who worked on the story, none of whom received a byline but are noted at the bottom of the article, correctly compiled the observable earmarks of this bubble market. But they failed to dig into the dark underbelly of how we got here.
Let’s start with the compromised Wall Street regulators in Washington. The Chair of the Securities and Exchange Commission, Jay Clayton, bolted from his post yesterday, after previously announcing he would leave at year’s end. That’s never a good sign. This is the same man involved in a failed coup to take over the office that criminally prosecutes Wall Street crimes (or not). The SEC can only bring civil charges. Clayton had Geoffrey Berman ousted from the U.S. Attorney’s office in Manhattan to open up the position for his nomination to the post. Wall Street wanted Clayton in the post because he was Wall Street’s lawyer before coming to the SEC. (See our report SEC Nominee Has Represented 8 of the 10 Largest Wall Street Banks in Past Three Years.)
The head of the federal regulator of national banks (those operating across state lines such as JPMorgan Chase’s 5,000-plus branches) is the Comptroller of the Currency. During Trump’s term as President, that position has been filled with Treasury Secretary Steve Mnuchin’s former pals from One West, the foreclosure king that Mnuchin ran before raising money for Trump’s campaign and becoming Treasury Secretary. The first Comptroller under Trump was Joseph Otting, who was CEO and President of One West while Mnuchin was Chairman of the bank. Otting stepped down in May and his successor became Brian Brooks, who had been Vice Chairman of One West. This marked the first time in three decades that former bankers had run the Office of the Comptroller of the Currency. One West came into being in 2009 in the midst of the last financial crisis when Mnuchin, Otting and a group of investors purchased the assets of the failed IndyMac Bank. Mnuchin was savaged during his confirmation hearing for the illegal foreclosures conducted by One West, including foreclosures against active-duty military members.
Mnuchin was also responsible for picking Jerome Powell as the Chair of the Federal Reserve, as reported by Politico and subsequently confirmed by Trump himself. Both Powell and the Vice Chairman for Supervision at the Fed, Randal Quarles, got rich at Carlyle Group, a private equity fund with a string of bankruptcies and job losses. Powell will likely be remembered in the history books for putting the investment manager, BlackRock, in charge of the Fed’s corporate bond bailout program and allowing it to buy up BlackRock’s own sinking junk-bond Exchange Traded Funds as part of the program. This was occurring while BlackRock managed $25 million of Powell’s personal money.
Apparently, a proven background in preying on average Americans is now a prerequisite for getting a job as a Wall Street regulator.
And as these crony regulators have sat atop these castrated watchdogs, this is what else has occurred to unleash what Bloomberg News calls the “animal spirits.”
As Wall Street’s former lawyer sat at the helm of the SEC, that federal regulator has looked the other way as the Wall Street banks traded their own bank stocks in their own dark pools, an illegal manipulation if ever there was one. These same dark pools have also traded in darkness the shares of the wildly overvalued tech stocks. While Wall Street On Parade has repeatedly reported on this outrageous conduct, the story has been completely ignored by mainstream media in the new roaring 20s.
The Federal Reserve is now so compromised as a regulator that as JPMorgan Chase, the largest bank in the U.S., has racked up an unprecedented five felony counts over the past six years, the Fed has seen fit to park $2 trillion of its mortgage-backed securities with this recidivist criminal offender.
Propping up the stock market bubble by buying back their own stock to the tune of tens of billions of dollars a year is another obscenity being allowed by publicly-traded corporations by the compromised SEC. The Wall Street banks are among the worst offenders. In July of 2017, Thomas Hoenig, then Vice Chair of the Federal Deposit Insurance Corporation (FDIC), sent a letter to the U.S. Senate Banking Committee. He made these points in his letter:
“[If] the 10 largest U.S. Bank Holding Companies [BHCs] were to retain a greater share of their earnings earmarked for dividends and share buybacks in 2017 they would be able to increase loans by more than $1 trillion, which is greater than 5 percent of annual U.S. GDP.
“Four of the 10 BHCs will distribute more than 100 percent of their current year’s earnings, which alone could support approximately $537 billion in new loans to Main Street.
“If share buybacks of $83 billion, representing 72 percent of total payouts for these 10 BHCs in 2017, were instead retained, they could, under current capital rules, increase small business loans by three quarters of a trillion dollars or mortgage loans by almost one and a half trillion dollars.”
As recently as June 24 of this year — a year of another massive Fed bailout of Wall Street — Bloomberg News reported the following regarding what Bank of America, Citigroup, JPMorgan Chase and Wells Fargo had spent on share buybacks and dividends since 2017:
“From the start of 2017 through March, the four banks cumulatively returned about $1.26 to shareholders for every $1 they reported in net income, according to data compiled by Bloomberg. Citigroup returned almost twice as much money to its stockholders as it earned, according to the data, which includes dividends on preferred shares. The banks declined to comment.”
And, of course, the derivatives that blew up Wall Street during the financial crisis of 2007 to 2010 have reached massive heights once again with nary an alarm bell being rung by regulators, as have the off-balance sheet accounting manipulations.
In short, all the same devils have returned to set in motion the next epic Wall Street collapse.