Search Results for: Federal Reserve

By Pam Martens and Russ Martens: August 8, 2024 ~ Remember the Repo Crisis in the fall of 2019 when the Federal Reserve had to jump in with both feet and make billions of dollars in revolving emergency loans each weekday to the megabanks on Wall Street? And remember when Wall Street On Parade was the only media outlet that named the banks that got the money and graphed the largest borrowers when the Fed released the granular loan data two years later? Well, guess what. Two of the financial firms that played a starring role in the repo crisis of 2019 appear to be part of the cast in the current trading debacle in Japan that’s spilling into global markets – if their share price performance is any indicator. The graph above shows that the Japanese financial firm, Nomura, and the giant U.S. megabank, Citigroup, are trading in eerie correlation … Continue reading →

By Pam Martens and Russ Martens: August 7, 2024 ~ Robert B. Reich, the former U.S. Labor Secretary under President Bill Clinton, a bestselling author and Professor Emeritus at UC Berkeley, penned an essay in May on why billionaires should not exist. Reich declares that there are only five ways someone can become a billionaire.  (Reich narrates his essay in the video below, complete with cool graphics.) Reich lists the following five methods of becoming a billionaire: (1) exploit a monopoly; (2) exploit inside information; (3) buy off politicians; (4) defraud investors; (5) get money from rich relatives. You are likely thinking that there is nothing wrong with inheriting wealth from a rich relative. But if the money is inherited from a billionaire relative, it means that he or she likely got that wealth through one of the first four methods. Thus, dirty money is simply moving from generation to generation. … Continue reading →

By Pam Martens and Russ Martens: July 31, 2024 ~ Last Thursday, the Board of Governors of the Federal Reserve System (the Fed), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), the federal supervisors of banks, issued 11 pages of warnings on what could go wrong when federally-insured banks get in bed with uninsured and untested financial technology companies. These financial technology companies are lovingly called Fintechs on Wall Street and in Silicon Valley where big money can be made by venture capitalists who bring the sexy-sounding Fintech startup as an IPO (Initial Public Offering) to investors on Wall Street. The Wall Street firm, in return, gets a nice payday in underwriting fees and a law firm also gets paid as counsel to the underwriters. Federal banking regulators have been in a frenzied scramble to deal with the growing fallout of disastrous marriages between … Continue reading →

By Pam Martens and Russ Martens: July 29, 2024 ~ The New York Fed, which has bank examiners engaged in supervising JPMorgan Chase, has also repeatedly provided bailout funds to JPMorgan Chase; was supervising JPMorgan Chase when it lost $6.2 billion of deposits from its federally-insured bank by gambling in derivatives on its London trading desk; allowed JPMorgan Chase’s Chairman and CEO, Jamie Dimon, to previously sit on the New York Fed’s Board of Directors, even as he faced the $6.2 billion derivatives trading scandal; and the New York Fed has exclusively used JPMorgan Chase to hold, as custodian, more than $2.3 trillion of the Federal Reserve’s Mortgage-Backed Securities (MBS) for the past 15-1/2 years – despite JPMorgan Chase admitting to five felony counts brought by the criminal division of the U.S. Department of Justice during that time. If there was an admitted felon in your neighborhood, would that be your … Continue reading →

By Pam Martens and Russ Martens: July 9, 2024 ~ Last week the American Banker published an opinion article by Arthur E. Wilmarth, Jr., the Professor Emeritus of Law at George Washington University. Wilmarth is the man who wrote the seminal book on the continuing threat to financial stability posed by U.S. megabanks – the same ones that blew up Wall Street and the U.S. economy in 2008. The title of Wilmarth’s article (paywall) is: “The FDIC’s resolution plan for failed megabanks is an empty promise.” The thrust of the article is this: the Dodd-Frank Act was passed by Congress and signed into law in 2010 – 14 years ago. One of its primary goals was to prevent taxpayers from having to rescue megabanks, as occurred in 2008. A key component of that goal is Title II of Dodd-Frank, which provides an Orderly Resolution Plan to unwind failing megabanks that does … Continue reading →

By Pam Martens and Russ Martens: June 27, 2024 ~ Yesterday the House Financial Institutions and Monetary Policy Subcommittee held a hearing titled “Stress Testing: What’s Inside the Black Box?” The hearing was convened to examine the manner in which the Federal Reserve conducts its stress tests of the megabanks. The witnesses called to testify included the following: an employee of the Financial Services Forum, a registered lobbyist for  banks; an employee of the Bank Policy Institute, a registered lobbyist for banks; Jonathan Gould, a lawyer from Jones Day, whose clients are banks; and one lonely soul, Greg Feldberg, Research Director of the Yale Program on Financial Stability, who was the only credible voice on the witness panel. The Chair of this Subcommittee is Andy Barr, a Republican from Kentucky whose largest four campaign donors are the following: employees of the Wall Street private equity firms Apollo Global Management and Blackstone … Continue reading →

By Pam Martens and Russ Martens: June 26, 2024 ~ According to Federal Reserve data, for the first time in its history, the Fed has been losing money on a consistent monthly basis since September 28, 2022. As of the last reporting date of June 19, 2024, those losses add up to a cumulative $176 billion. As the chart above using Fed data shows, the losses thus far in 2024 have ranged from a monthly high of $11.076 billion in February to a low of $5.674 billion in May. These losses are separate and distinct from the unrealized losses the Fed is experiencing on the debt securities it holds on its balance sheet. It does not mark those losses to market since it intends to hold the securities to maturity and their principal is guaranteed at maturity by the U.S. government. The losses shown in the above chart are actual cash … Continue reading →

By Pam Martens and Russ Martens: June 25, 2024 ~ Last Friday, Goldman Sachs Bank USA, the federally-insured, U.S. taxpayer-backstopped commercial bank that the international trading behemoth, Goldman Sachs Group, is allowed to operate, got a smackdown from two of its regulators, the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board (the Fed). The two regulators released a letter they had sent to David Solomon, Chairman and CEO of Goldman Sachs Group, which revealed that the commercial bank had flunked its wind-down test known as its “living will.” Derivatives were specifically cited for the “shortcomings.” Of particular note, the regulators wrote that Goldman Sachs Bank USA “…did not demonstrate the ability to model its derivatives portfolio unwind by counterparty for segmenting the portfolio in resolution. In the [upcoming] 2025 Plan, the Covered Company should demonstrate the ability to view derivatives positions at a counterparty level within both the portfolio … Continue reading →

By Pam Martens and Russ Martens: June 24, 2024 ~ Since the financial crash of 2008 and the Fed’s multi-trillion dollar bank bailouts that followed, the Office of the Comptroller of the Currency (OCC) has been waving a giant red flag every quarter in its “Bank Trading and Derivatives Activities” reports. For sixteen years the OCC has been reporting that just four megabanks are responsible for more than 80 percent of the trillions of dollars in bank derivatives. As the chart above shows, 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 U.S. banks, savings associations and trust companies. That’s four banks holding 87 percent of all derivatives at all 4,587 federally-insured institutions in the U.S. that existed as of December 31, 2023. … Continue reading →

By Pam Martens and Russ Martens: June 10, 2024 ~ The much-hyped artificial intelligence chipmaker, Nvidia (ticker NVDA), reached a market cap of $3 trillion on Thursday, beating out Apple as the second most valuable company, just behind Microsoft. This morning, Nvidia’s 10-for-1 stock split will become effective, reducing its share price to, ideally, entice more retail investors. Year-to-date, Nvidia’s stock price is up 144 percent through the closing bell on Friday. The company was founded on April 5, 1993 and lived the bulk of its existence in obscurity until a New York Times article appeared on September 1, 2017 with this headline: “Why a 24-Year-Old Chipmaker Is One of Tech’s Hot Prospects.” Browsing the company’s prolific newsroom reveals no shortage of bold pronouncements. A June 2 press release carries this seismic prediction: “The next industrial revolution has begun. Companies and countries are partnering with NVIDIA to shift the trillion-dollar … Continue reading →