By Pam Martens and Russ Martens: October 16, 2023 ~ On May 1, the Federal Deposit Insurance Corporation announced that First Republic Bank had failed and that it was being sold to JPMorgan Chase. At the time, JPMorgan Chase was already the largest and riskiest bank in the United States. The sweetheart deal the bank got from the FDIC to take over First Republic included the FDIC eating 80 percent of any losses on single-family residential mortgages for 7 years and 80 percent of any losses on commercial loans, including commercial real estate, for five years. The FDIC also provided JPMorgan Chase with a $50 billion, five-year fixed-rate loan at an undisclosed interest rate. According to the filing that JPMorgan Chase made with the Securities and Exchange Commission last Friday, the deal also gave JPMorgan Chase something that it desperately needed: deposits. According to the 8-K filing that JPMorgan Chase made with the … Continue reading →

By Pam Martens and Russ Martens: October 12, 2023 ~ On Monday, Michael Barr, the Vice Chair for Supervision at the Federal Reserve, addressed a contentious issue in a speech before the American Bankers Association’s annual convention in Nashville. The topic was why federal banking regulators have proposed higher capital levels for the largest U.S. banks, those with assets over $100 billion. As we reported on September 20, there has been aggressive pushback on the proposal from large banks, their lobbyists and their trade associations. (Community banks are not impacted by the proposal.) During his speech, Barr put a staggering dollar figure on the destruction to the U.S. economy that could materialize from another major financial crisis. Barr said this: “Research suggests the costs of a financial crisis are sizable. While estimates vary widely, the cumulative loss in economic activity is consistently estimated to lie above 20 percent of annual GDP—and in … Continue reading →

By Pam Martens and Russ Martens: October 11, 2023 ~ Immediately upon departing her post as Chair of the Federal Reserve, but prior to getting the nod from the Biden administration to become U.S. Treasury Secretary, Janet Yellen engaged in what the courageous reporter at ProPublica, Jesse Eisinger, called a “two-fisted money grab from banks.” Yellen raked in more than $7 million in speaking fees with the bulk of that coming from Wall Street banks and trading houses, including JPMorgan Chase. In a Tweet, Eisinger said: “This is corruption, but isn’t called that because it’s so quotidian.” Now there is the appearance that a quid pro quo is coming full circle. According to a press release posted on JPMorgan Chase’s website, “it has been designated by the United States Treasury Department under a financial agency agreement to provide account validation services for federal government agencies” in order to ensure “Treasury’s commitment to … Continue reading →

By Pam Martens and Russ Martens: October 10, 2023 ~ An academic study released in April found that during the fastest pace of Fed interest rate hikes in 40 years, the majority of U.S. banks failed to hedge their interest rate risk. The study on hedging is titled: Limited Hedging and Gambling for Resurrection by U.S. Banks During the 2022 Monetary Tightening? Its authors are Erica Jiang, Assistant Professor of Finance and Business Economics at USC Marshall School of Business; Gregor Matvos, Chair in Finance at the Kellogg School of Management, Northwestern University; Tomasz Piskorski, Professor of Real Estate in the Finance Division at Columbia Business School; and Amit Seru, Professor of Finance at Stanford Graduate School of Business. Among the key findings of the study are the following: “Over three quarters of all reporting banks report no material use of interest rate swaps.” “Only 6% of aggregate assets in the U.S. banking system … Continue reading →

By Pam Martens and Russ Martens: October 9, 2023 ~ It took eight years of research to compile a data set of annual balance sheets of more than 11,000 commercial banks dating back to 1870 in 17 advanced economies. And in every country, the study arrived at the same finding: concentrating the banking system in the hands of five or less giant banks leads to financial instability and more severe financial crises. The bank balance sheets of the following countries were examined: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The 150-year banking study is titled: “Survival of the Biggest: Large Banks and Financial Crises.” Its authors are Matthew Baron of Cornell University; Moritz Schularick of the Kiel Institute for the World Economy and Sciences; and Kaspar Zimmermann of the Leibniz Institute for Financial Research SAFE. Other … Continue reading →

By Pam Martens and Russ Martens: October 5, 2023 ~ As evidenced by the speech that the FDIC Chair, Martin Gruenberg, delivered at a conference yesterday, the FDIC is very much aware that both the level of uninsured deposits and the concentration of those uninsured deposits among a handful of mega banks is a serious problem for the U.S. banking system. Gruenberg didn’t name names, but we will do that in this article. Gruenberg pointed out in his speech that year-end data for the three banks that failed this past spring indicated that anywhere from 90 percent to 70 percent of their deposits were uninsured. (During a banking panic, uninsured deposits are typically those that head for the exits at the fastest clip.) But those three failed banks (Silicon Valley Bank, Signature Bank and First Republic Bank) were minnows compared to the asset-size of the banking whales which now account for … Continue reading →

By Pam Martens and Russ Martens: October 4, 2023 ~ Jamie Dimon is the Chairman and CEO of the serially-charged criminal trading operations of JPMorgan Chase, which thanks to the repeal of the Glass-Steagall Act in 1999, is also allowed to own the largest federally-insured bank in the United States and use its trillions of dollars in mom and pop deposits to gamble in derivatives. Robert Reich is Professor of Public Policy at the University of California, Berkeley; served in the administrations of Presidents Ford and Carter and as Labor Secretary under Clinton; is the author of 18 books, including bestsellers The Work of Nations, Saving Capitalism, and Aftershock: The Next Economy and America’s Future. Reich received his B.A. from Dartmouth College, his M.A. from Oxford University where he was a Rhodes Scholar, and his J.D. from Yale Law School. Jamie Dimon made the mistake of coming into the radar of … Continue reading →

By Pam Martens and Russ Martens: October 3, 2023 ~ The Fed’s problem and the U.S. Treasury’s problem just became the problem of every American who has their retirement savings stuffed in the stock market via 401(k) plans or direct holdings. As the chart above shows in crisp terms, stocks do not like yields on the 10-year U.S. Treasury note rising to a level that is competitive with the return on stocks – especially since the principal on the Treasury note is guaranteed at maturity while the principal in the stock market is guaranteed to take one’s stomach on a roller coaster ride. Last evening, the 10-year U.S. Treasury note had spiked to a yield of 4.682 percent, its highest yield since 2007. As of early this morning, its yield had spiked even higher, to 4.738 percent, making a 5 percent handle increasingly possible. In response to the competition from Treasury … Continue reading →

By Pam Martens and Russ Martens: October 2, 2023 ~ In the eyes of Wall Street veterans who are paying close attention to what’s going down at the mega banks on Wall Street, federal regulators are making the crime wave at these banks worse, not better. The federal fines for egregious behavior at these banks are getting smaller and more meaningless by the day. Take, for example, what happened on Friday. The Commodity Futures Trading Commission (CFTC) fined three of the largest trading houses on Wall Street a combined $53 million for derivative reporting violations. Those trading houses were units of Goldman Sachs, Bank of America, and JPMorgan Chase. But what was particularly tone deaf about the CFTC’s settlement with JPMorgan Chase was the tiny amount of the monetary fine and the praise heaped on the five-count felon bank for its “cooperation” with the federal regulator. According to the CFTC, over … Continue reading →

By Pam Martens and Russ Martens: September 28, 2023 ~ Next Tuesday, the U.S. Supreme Court will hear oral arguments in a case that could have far reaching effects on the legislative ability of Congress to have flexibility in how it funds regulatory agencies, as well as place in jeopardy the survival of the Consumer Financial Protection Bureau (CFPB), a government watchdog for the little guy, elderly, young, poor and unsophisticated against goliaths on Wall Street and other financial predators. The case arrives at the Supreme Court as a result of a decision handed down in October by a three-judge panel at the right-wing 5th Circuit Court of Appeals. All three judges on the panel (Don Willett, Kurt Engelhardt, and Cory Wilson) were appointed by former President Donald Trump. The 5th Circuit effectively ruled that the CFPB’s funding system, legislated by Congress, was unconstitutional. The shadow of Trump and the invisible … Continue reading →