Category Archives: Uncategorized

By Pam Martens and Russ Martens: November 26, 2019 ~ There is one phrase on Wall Street that instills fright like no other – “intra-day bankruptcy” – especially if it’s describing a bankruptcy filing by a highly interconnected Wall Street firm. On July 20, 2008 a Federal Reserve economist, Patrick Parkinson, used that phrase in an email to describe fears that Lehman Brothers might have to make an intra-day bankruptcy filing and to speculate on what was going on in the minds of the folks at JPMorgan Chase, Lehman’s clearing bank, regarding how it might get “stuck” with Lehman’s overnight loans. The email describes perfectly what is highly likely going on in the minds of top executives at JPMorgan Chase today and why the Fed has been pumping hundreds of billions of dollars each week into unnamed trading houses on Wall Street since September 17. The email was contained in … Continue reading →

By Pam Martens and Russ Martens: November 25, 2019 ~ The National Information Center is a little-known repository of bank data collected by the Federal Reserve. It is part of the Federal Financial Institutions Examination Council (FFIEC), which was created by federal legislation to create uniformity in the examination of U.S. financial institutions by the numerous federal regulators of banks. Quietly, the National Information Center has done something that has likely made Jamie Dimon hopping mad. Dimon is the Chairman and CEO of JPMorgan Chase who has bragged perpetually in his annual letter to shareholders about how the bank he leads has a “fortress balance sheet.” But now the National Information Center has created a graphic profile of JPMorgan Chase versus its peer banks. The graphics crunch a series of important financial metrics at JPMorgan Chase, showing it to be the riskiest bank in the United States. The data used … Continue reading →

By Pam Martens and Russ Martens: November 22, 2019 ~ As you may have noticed by now, Wall Street On Parade is not buying the narrative that the $3 trillion that the New York Fed has pumped out to the trading houses on Wall Street since September 17 is part of routine open market operations that the Fed is legally allowed to do. We are also not buying the idea that if the same banks that backed away from lending during the financial crisis are doing so again today, this is not a matter that deserves an airing before the Senate Banking and House Financial Services Committees. Thus far, not one hearing has been held to examine why the New York Fed, for the first time since the financial crisis, has once again become the lender of last resort to Wall Street. Keep in mind that the $3 trillion in … Continue reading →

By Pam Martens and Russ Martens: November 21, 2019 ~ Yesterday the Federal Reserve released the minutes of its Federal Open Market Committee meeting of October 29-30. The minutes show that the FOMC members were fingering their worry beads over plans for their longer-term handling of the hundreds of billions of dollars weekly that the New York Fed is pumping into the overnight and term repo markets. The worries center on whether the Fed is creating moral hazard and/or that the banks will “take on an undesirably high amount of liquidity risk.” We have news for the Fed: both of those horses have left the barn. The Fed enshrined moral hazard and liquidity risk among Wall Street banks when it funneled $29 trillion to the miscreant banks from 2007 to 2010 while intentionally hiding its footprints from the public until it lost its court battle and had to disclose the … Continue reading →

By Pam Martens and Russ Martens: November 20, 2019 ~ The New York Fed has now pumped out upwards of $3 trillion in a period of 63 days to unnamed trading houses on Wall Street to ease a liquidity crisis that has yet to be credibly explained. In addition, it has launched a new asset purchase program, buying up $60 billion each month in U.S. Treasury bills. Based on the continuing escalation of its plans, it appears to be testing the limits of what the public will tolerate. We thought it was time to answer the question: who exactly owns the New York Fed and its magical money spigot that can pump trillions of dollars into Wall Street at the press of a button. The largest shareowners of the New York Fed are the following five Wall Street banks: JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, and Bank of New … Continue reading →

By Pam Martens and Russ Martens: November 19, 2019 ~ According to the most recent statistical release from the Federal Reserve, the average annual interest rate on 90-day AA-rated financial commercial paper has risen from 2.18 percent in 2018 to 2.27 percent through November 15 of this year. The rise in the average annual interest rate on 90-day commercial paper contrasts with the fact that since May of this year, the 90-day (3-month) Treasury bill’s yield has moved sharply lower, from 2.4 percent to yesterday’s closing yield of 1.56 percent – a decline of 35 percent. The Federal Reserve Bank of New York has effectively become the repo market – pumping out upwards of $3 trillion to that market since September 17. Can we expect the Fed to turn on the money spigot to the commercial paper market next? We raise this scenario because that’s exactly what the Fed did … Continue reading →

By Pam Martens and Russ Martens: November 18, 2019 ~ Last week, Jim Grant, the Editor of Grant’s Interest Rate Observer, was interviewed by CNBC’s Rick Santelli. Grant said that since September 17, the Fed has pumped “upwards of $3 trillion” in repo loans to Wall Street. Santelli asked if the Fed had effectively nationalized the repo market. Grant said “there is no more price discovery and we are dealing with administered rates.” For the first time since the financial crisis, the Federal Reserve Bank of New York has been pumping out hundreds of billions of dollars each week to trading houses on Wall Street in order to provide liquidity to the repo (repurchase agreement) market where financial institutions make collateralized, overnight loans to each other. Liquidity had dried up in this market to the point that on September 17 overnight lending rates spiked from the typical 2 percent to … Continue reading →

By Pam Martens and Russ Martens: November 15, 2019 ~ Yesterday, for the second day in a row, the Chairman of the Federal Reserve, Jerome Powell, gave testimony and took questions before a Congressional Committee. On Wednesday it was the Joint Economic Committee; yesterday it was the House Budget Committee. On both days, only one member of the Committee dared to ask a question about the hundreds of billions of dollars the Fed is hurling at Wall Street each week in repo loans. The crisis in the repo loan market, where financial institutions make overnight loans to each other, began on September 17 when the interest rate spiked from the typical range of 2 percent to 10 percent. For the first time since the financial crisis, the Federal Reserve had to step in with lots of cash to ease the liquidity stresses. The Fed has continued to offer that cash … Continue reading →

By Pam Martens and Russ Martens: November 14, 2019 ~ Yesterday Federal Reserve Chairman Jerome Powell testified before the Joint Economic Committee of Congress. Only one Congressman, Kenny Marchant (R-TX), had the courage to ask Powell about the Fed’s intervention in the repo loan market beginning on September 17. Since that time the Fed has been pumping hundreds of billions of dollars each week (that the New York Fed creates electronically out of thin air) into its 24 primary dealers on Wall Street. These primary dealers are not commercial banks that might be inclined to use the funds to make loans to local businesses or to consumers to buy a house and help their local economies. No, 23 of the 24 primary dealers are stock brokerage firms and investment banks that engage in leveraged bets in the stock, bond, commodities, and derivatives markets. The 24th is a foreign bank. (See … Continue reading →

By Pam Martens and Russ Martens: November 13, 2019 ~ JPMorgan Chase is not a bank that federal regulators can simply put on autopilot and hope for the best. When the U.S. Senate’s Permanent Subcommittee on Investigations conducted a formal probe into how the bank lost $6.2 billion of its federally-insured bank’s deposits by gambling in derivatives in London in 2012, the Chair of the subcommittee, former Senator Carl Levin, said that the bank had “piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.” Over the past five years, the bank has admitted to three criminal felony charges brought by the U.S. Department of Justice and is currently under an ongoing criminal probe by federal prosecutors over charges that its traders ran an eight-year criminal enterprise out of its precious metals trading desk in New York. But it seems that the Federal … Continue reading →