Search Results for: Federal Reserve

By Pam Martens and Russ Martens: December 3, 2024 ~ The semi-annual Financial Stability Report released recently by the Federal Reserve Board of Governors rang a loud warning bell about high levels of leverage at hedge funds and life insurers. Wall Street watchers will no doubt recall that in 2008, during the worst Wall Street collapse since the Great Depression, Bear Stearns went under after it blew up two internal hedge funds the prior year and the giant life insurer, American International Group (AIG), blew itself up by acting as a counterparty to Wall Street’s derivative schemes and had to be taken into receivership by the U.S. government. On the matter of leverage at hedge funds, the Fed wrote this in its most recent Financial Stability Report: “Comprehensive data collected through SEC Form PF indicated that measures of leverage averaged across all hedge funds were at or near the highest level observed … Continue reading →

By Pam Martens and Russ Martens: November 25, 2024 ~ Last Friday, in a flurry of announcements of cabinet nominees, President-elect Donald Trump dropped the name that the entire world had been waiting to hear: his pick for U.S. Treasury Secretary. The man Trump chose, Scott Bessent, is the founder and majority owner of the hedge fund, Key Square Capital Management LLC. If confirmed by the Senate, Bessent will inherit sprawling powers. He will sit at the helm of a federal agency that includes the IRS; the Office of the Comptroller of the Currency, which regulates national banks and reports on their hundreds of trillions of dollars in derivatives; the Bureau of Engraving and Printing; the U.S. Mint; the Financial Crimes Enforcement Network (FinCEN) which is tasked with combating money laundering but has failed miserably in the job; and numerous other units. In addition, legislation passed by Congress will put Bessent in charge of … Continue reading →

Commentary Next to Arrows Has Been Added by Wall Street On Parade. By Pam Martens and Russ Martens: October 21, 2024 ~ According to its own FRED data, the last time the central bank of the United States – the Federal Reserve – operated in the green was September 14, 2022, more than two years ago. Since then, it has been consistently losing over $1 billion a week with its cumulative operating losses now topping $204 billion as of the last reporting by the Fed on October 16, 2024. Operating losses of this magnitude are unprecedented at the of Fed, which was created in 1913. If a publicly-traded company had been bleeding operating losses of more than $1 billion a week for more than two years, there would very likely be a change of leadership at the top. But Fed Chair Jerome Powell is no ordinary mortal. He survived the worst trading … Continue reading →

By Pam Martens and Russ Martens: September 19, 2024 ~ The Federal Reserve yesterday cut its benchmark interest rate, the Fed Funds rate, for the first time in four years. The cut was by half a point rather than the customary quarter point increments typical of Fed rate moves. Only one member of the Federal Open Market Committee (FOMC), Michelle Bowman, voted against the action. Bowman wanted a quarter point cut according to the FOMC announcement. A Fed rate cut of a quarter point to a half point was widely anticipated by the market, so the stock market’s wild swings were puzzling to veteran Wall Street watchers. The FOMC released its written announcement at 2 p.m. As the chart above indicates, the written announcement produced a surge in the Dow Jones Industrial Average to an intraday high of 41,981.97, which was also an all-time high on an intraday basis. But within … Continue reading →

By Pam Martens and Russ Martens: September 16, 2024 ~ It is rare for a book to be so comprehensive and insightful that it provides a roadmap for the future – especially when its cast of characters are the lawyered-up megabanks on Wall Street and their legions of lobbyists and public relations flacks. We’re referring to Taming the Megabanks: Why We Need a New Glass-Steagall Act by Arthur E. Wilmarth, Professor Emeritus of Law at George Washington University. Last Tuesday, the Federal Reserve completely capitulated to the demands of the Wall Street megabanks on its plan to dramatically raise capital levels at the megabanks — the so-called Basel III Endgame. The Fed, via its Vice Chair for Supervision, Michael Barr, announced it was cutting the required capital it had formally proposed in July of 2023 by more than half and will continue to allow the megabanks to use their own dodgy … Continue reading →

By Pam Martens and Russ Martens: September 12, 2024 ~ When the next megabank blows up from its derivative exposure, you can add the names Jamie Dimon and Patick McHenry to former Republican Congressmen Randy Hultgren and Kevin Yoder as four of the men who greased the skids for another derivatives banking crisis. (For our report on the role played by Hultgren and Yoder, see our 2021 report here.) Dimon and McHenry are the latest lead players in the disastrous history of derivative regulation in the U.S. Dimon is the Chair and CEO of the riskiest and largest bank in the United States, JPMorgan Chase. After his bank lost $6.2 billion gambling in derivatives in London in 2012 – using deposits from his federally-insured bank – Dimon would, to rational minds, seem like the least qualified candidate to be giving advice to his banking regulators on how much capital megabanks need … Continue reading →

By Pam Martens and Russ Martens: September 5, 2024 ~ Most market watchers rely on the monthly margin debt figures published by Wall Street’s self-regulator, FINRA, as the reliable gauge in determining how much of securities trading on Wall Street is being done with borrowed money, known as margin debt. According to the FINRA data, as of March 31, 2024, margin debt stood at $784.136 billion. Unfortunately, FINRA only has access to margin debt data filed by the brokerage firms it regulates (also known as brokers and dealers). Thanks to the repeal of the Glass-Steagall Act in 1999, which allowed federally-insured banks to be gobbled up by the trading casinos on Wall Street, the vast bulk of margin debt is now being loaned out not by brokerage firms but by giant banks where the U.S. taxpayer will be on the hook for a bailout if they go belly up from bad … Continue reading →

By Pam Martens and Russ Martens: September 4, 2024 ~ It appears that Senator Elizabeth Warren was spot on in her assessment of the lack of a backbone for Federal Reserve Chairman Jerome Powell when it comes to raising capital requirements on the powerful megabanks on Wall Street. At a March 7 Senate Banking Committee hearing in which Powell was appearing as a witness, Warren said this: “Despite all you said last year when the banks failed [in the spring banking crisis of 2023] about supporting Vice Chair Barr’s recommendations to strengthen rules for big banks, public reporting now says that you are driving efforts inside the Fed to weaken the capital rule. You even told the House Financial Services Committee representatives yesterday that you think it’s ‘very plausible’ that you withdraw the rule.” The capital rule that Senator Warren is referring to was proposed more than a year ago by … Continue reading →

By Pam Martens and Russ Martens: August 27, 2024 ~ The P.R. genius at JPMorgan Chase that thought it would be a good idea to have Jamie Dimon lecture the next president of the United States on how to run the country in an OpEd (paywall) at the Washington Post will likely be seeking a career change soon. Dimon is the Chairman and CEO of the largest and riskiest bank in the United States. Under Dimon’s tenure, the bank has racked up five felony counts which showcase Dimon as the worst possible source of sound leadership advice. In 2014, the bank was charged with laundering money for decades for the biggest Ponzi artist in U.S. history – Bernie Madoff. In 2015, the bank was charged with being part of a bank cartel that rigged foreign currency markets. And in 2020, the bank was charged with two more felony counts for engaging … Continue reading →

By Pam Martens and Russ Martens: August 20, 2024 ~ As indicated on the above graph, as of December 31, 2023, Goldman Sachs Bank USA, JPMorgan Chase Bank N.A., Citigroup’s Citibank and Bank of America held a staggering total of $168.26 trillion in derivatives out of a total of $192.46 trillion at all federally-insured U.S. banks, savings associations and trust companies. That’s just four banks holding 87 percent of all derivatives at all 4,587 federally-insured financial institutions in the U.S. that existed as of December 31, 2023. You might be asking yourself the very valid question as to why the Dodd-Frank financial reform legislation of 2010, that followed the Wall Street financial quake of 2008, didn’t correct the derivatives gambling that played a central role in crashing the U.S. financial system. For why the threat of derivatives never actually went away, see our report: Meet the Two Congressmen Who Facilitated Today’s Derivatives … Continue reading →