By Pam Martens and Russ Martens: December 4, 2019 ~ The titular head of bank supervision for the Federal Reserve is Randal Quarles. We use the term, titular, because the job was so amorphous that President Obama never bothered to fill the slot, even though it was legally mandated under the Dodd-Frank financial reform legislation of 2010. Everyone on Wall Street knows that it’s the all-powerful New York Fed that “supervises” the behemoth banks on Wall Street. Last week New York Times’ reporter Jeanna Smialek accurately summed up the real job of Randal Quarles, writing this: “In his first 21 months on the job, Randal K. Quarles, the Federal Reserve’s vice chairman for supervision and regulation, met at least 22 times with partners at his former law firm, Davis Polk & Wardwell, which represents many of the nation’s largest banks.” Later in the article, Smialek adds this: “He has talked … Continue reading →

By Pam Martens and Russ Martens: December 3, 2019 ~ The House Financial Services Committee has released its memorandum outlining the topics that will be raised in its hearing tomorrow with Federal bank regulators, which will include Randal Quarles, Vice Chairman of Supervision at the Federal Reserve. Noticeably absent from the list of topics is what legislative authority the Federal Reserve has that gives it the legal power to be pumping out hundreds of billions of dollars each week in revolving loans to the trading houses of Wall Street. Since September 17, the Federal Reserve has allowed its New York Fed branch to funnel approximately $3 trillion to unnamed trading houses on Wall Street, much of it at interest rates of less than 2 percent while the behemoth banks that own those trading houses charge their mom and pop credit card customers 17 percent on their credit cards. This looks … Continue reading →

By Pam Martens and Russ Martens: December 2, 2019 ~ James Gorman is the Chairman and CEO of Morgan Stanley. He also sits on the Board of Directors of the Federal Reserve Bank of New York (New York Fed), one of Morgan Stanley’s regulators. The New York Fed is one of 12 regional Federal Reserve banks – but the only one willing to turn on a multi-trillion dollar money funnel to Wall Street’s mega banks when they need a secret bailout. Since September 17 of this year, the New York Fed has pumped upwards of $3 trillion in revolving loans to trading houses on Wall Street, without naming which firms are getting the money and why they’re getting it. From December 2007 to the middle of 2010, the New York Fed turned on its money funnel to Wall Street to the tune of $29 trillion – a fact it battled … Continue reading →

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 →