Fed Sets Off Panic with Plan to Eliminate Reserves at Wall Street’s Mega Banks

Fed Chair Powell at Press Conference, January 29, 2020

By Pam Martens and Russ Martens: March 16, 2020 ~ Last evening, it became painfully clear that the Board of Governors at the Federal Reserve do not understand the inner workings of Wall Street. After prattling on for months about the need to rebuild “ample reserves” at the behemoth Wall Street banks after the Fed was forced on September 17 to become the liquidity provider of last resort to the tune of $9 trillion cumulatively thus far, the Fed flipped its thinking on a dime yesterday and sent markets into a panic. As of 8:55 a.m. this morning, S&P 500 futures are locked, limit down, suggesting a steep drop in stocks at the open of trading at 9:30 a.m. Along with a series of other measures to prop up liquidity on Wall Street, the Federal Reserve Board of Governors announced last evening that it “has reduced reserve requirement ratios to … Continue reading

The Fed Has Pumped $9 Trillion into Wall Street Over the Past Six Months, But Mnuchin Says “This Isn’t Like the Financial Crisis”

U.S. Treasury Secretary Steve Mnuchin (Thumb Print)

By Pam Martens and Russ Martens: March 14, 2020 ~ On February 12, 2020, the Dow Jones Industrial Average closed at 29,551.42. Yesterday, March 13, the Dow closed at 23,185.62 -– a loss of 6,365.80 points in one month’s time, or 21.54 percent. In 2008, the greatest financial calamity since the Great Depression, the Dow had lost 2,339.60 points or 21.4 percent one month after the frightening events of September 15, 2008 when Lehman Brothers filed bankruptcy, Merrill Lynch had to be taken over by Bank of America, and one day before the U.S. government seized the giant insurer, AIG, because it couldn’t pay the tens of billions of dollars in derivative bets it had made with the mega banks on Wall Street. On this past Friday morning, in what appeared to be an effort to restore confidence on Wall Street, U.S. Treasury Secretary Steve Mnuchin gave an interview on … Continue reading

The Fed Has 233 Secret Documents about JPMorgan’s Potential Role in the Repo Loan Crisis

Jerome Powell, Chairman of the Federal Reserve

By Pam Martens and Russ Martens: March 13, 2020 ~ The Federal Reserve Board of Governors has acknowledged to Wall Street On Parade that it has 233 documents that might shed some light on why JPMorgan Chase was allowed by the Fed to draw down $158 billion of the reserves it held at the Fed last year, creating a liquidity crisis in the overnight loan market according to sources on Wall Street. After taking four months to respond to what should have been a 20-business day turnaround on our Freedom of Information Act request, the Federal Reserve denied our FOIA in its entirety. (Our earlier request to the New York Fed resulted in the same kind of stonewalling. See The New York Fed Is Keeping JPMorgan’s Secrets Close to Its Chest.) The Wall Street liquidity crisis forced the Federal Reserve, beginning on September 17 of last year, to begin making … Continue reading

Federal Reserve Announces Unprecedented $1.5 Trillion in Loans to Wall Street Today and Tomorrow

Federal Reserve Building in Washington, D.C.

By Pam Martens and Russ Martens: March 12, 2020 ~ Making the most unprecedented announcement in the history of Wall Street, the Federal Reserve Bank of New York announced today that it will be offering $500 billion in 3-month repo loans to its primary dealers (Wall Street trading firms) today at 1:30 p.m. That $500 billion comes on top of the $198.10 billion the New York Fed loaned the street in its morning repo operations. Tomorrow, the New York Fed said it will offer its primary dealers another $500 billion in a 3-month loan and another $500 billion in a one-month loan, bringing the two-day total to potentially more than $1.7 trillion being offered at super low interest rates. (The Fed will also offer its regular one-day loan of $175 billion tomorrow.) These are staggering, unprecedented sums being offered by the Fed while it simultaneously claims that the Wall Street … Continue reading

Another Dangerous Virus Hits the U.S. – Wall Street Bank Contagion

S&P 500 Index Versus Morgan Stanley, Goldman Sachs, Bank of America, JPMorgan Chase and Citigroup, Feb 1 through March 11, 2020

By Pam Martens and Russ Martens: March 12, 2020 ~ There has been a lot of delusional talk about the strong capital levels of the mega banks on Wall Street, not only from the Federal Reserve, but also from Wall Street analysts spreading fantasies about the banks on cable news programs. We took an afternoon off last Friday to hear what was being said about the banks on CNBC. We were stunned to hear Mike Mayo, a long-tenured bank analyst on Wall Street, who currently works for Wells Fargo Securities, deliver a huckster-like assessment of the mega Wall Street banks. Mayo said this: “The banking industry has the strongest balance sheet in a generation. Now think about this: the banks have added $1 trillion of additional capital – that’s $1 trillion with a T; $2 trillion of additional cash; $3 trillion of additional deposits. You have a Federal Reserve stress … Continue reading

Federal Reserve to Offer $270 Billion in Loans to Wall Street Tomorrow

John Williams, President of the Federal Reserve Bank of New York

By Pam Martens and Russ Martens: March 11, 2020 ~ The little people in America will have to continue to wait to hear any concrete plans for their government to provide financial relief to them for business disruptions resulting from the coronavirus. But Wall Street banks and their sprawling trading desks got the word today that the Fed’s money gusher (repo loans) that began on September 17 of last year will offer them up another $270 billion in cold hard cash at unprecedented low interest rates tomorrow. The Fed announced that its 1-day emergency loans that it has been making each weekday will increase to as much as $175 billion a day beginning tomorrow; its 14-day loans, which will continue to be offered twice a week, will remain at the elevated amount of $45 billion; and the Fed will add three one-month loans of a whopping $50 billion each. The … Continue reading

Role of a Wall Street Law Firm in the Joe Biden Resurgence Raises Alarms for Progressives

By Pam Martens and Russ Martens: March 11, 2020 ~ There has been the feeling of an invisible hand in the miraculous comeback of Democratic presidential candidate Joe Biden. Biden lost all three of the first races in Iowa, New Hampshire and Nevada, then spiraled to a long series of state victories despite a lackluster and sometimes rambling performance in the presidential debates. Since the invisible hand in unlikely elections always has a money trail somewhere, we decided to pull back the dark curtain using campaign financing data at the Center for Responsive Politics (OpenSecrets.org). The name of the giant Wall Street law firm – Paul, Weiss, Rifkind, Wharton & Garrison LLP – emerges as a common denominator. Paul Weiss has not only been a major donor to the Biden campaign but it was simultaneously a major donor to the campaigns of the four presidential candidates who dropped out of … Continue reading

There Was a Bloodbath in Wall Street Banks and Insurers Yesterday

By Pam Martens and Russ Martens: March 10, 2020 ~ President Donald Trump is bringing a pea shooter to a gunfight. If you look carefully at the charts on this page from yesterday’s trading bloodbath, it’s clear that there is a deep financial crisis playing out. The idea that this can be remedied with a payroll tax cut is the stuff of tooth fairies. And this crisis didn’t begin with the coronavirus. Headlines about the virus did not start appearing in the U.S. until January of this year. But the Federal Reserve began making hundreds of billions of dollars each week in cheap loans to Wall Street’s banks on September 17, 2019 — the first time it had done this since the 2008 financial crisis. You can earmark September 17, 2019 as the actual date that this Financial Crisis II got underway. All of the toothless financial reforms of the … Continue reading

What’s the End Game in the Saudi Oil Price War?

By Pam Martens: March 9, 2020 ~ In early afternoon trading, West Texas Intermediate, the domestic crude oil in the U.S., had lost over 20 percent on the day, 39 percent in the last 18 calendar days and 48 percent from its peak this year. The panic selling resulted from a failed OPEC meeting with its allies last week when Russia refused to go along with crude oil production cuts proposed by OPEC to shore up the price of crude. Following the failed meeting, Saudi Arabia began to dramatically discount its oil prices to customers to grab market share. It reminded me of an earlier Saudi oil price war in 1986 – without the coronavirus to add to the panic. In 1986 I was working at Shearson with newly acquired stock and commodity licenses. I had the good fortune of sitting next to a very savvy female oil trader who … Continue reading

Dow Drops 2046 Points (7.9 Percent) in Morning Trade; Two Banks Tank

By Pam Martens and Russ Martens: March 9, 2020 ~ We knew Fed Chair Jerome (Jay) Powell was not on solid footing last Tuesday when he answered a question at his press conference from Washington Post reporter, Heather Long. She wanted to know how he felt about “rising concern about credit markets and possible insolvencies and defaults either from businesses or individuals from the coronavirus.” Powell answered Long with this: “financial markets are functioning in an orderly manner and all that sort of thing.” That wasn’t true then and it certainly isn’t true as of noon today. The Fed Chair neglected to mention to Long that beginning on September 17, 2019, as a result of disorderly market functioning, it had started pumping out hundreds of billions of dollars in super-cheap loans each week to trading houses on Wall Street – the first time it had made such repo loans since … Continue reading

Flock of Black Swans Tanks Stocks, Oil, Treasury Yields; Fed Sticks Its Finger in the Dike

By Pam Martens and Russ Martens: March 9, 2020 ~ There are now so many Black Swans circling in the sky against darkening clouds that it’s starting to feel like news on steroids. Here’s what we woke up to this morning: Futures on the Dow Jones Industrial Average contract had fallen 5 percent overnight so they are now locked, limit-down in the futures market in Chicago. We can get a pretty good idea, however, of just how far the stock market will fall when it opens at 9:30 a.m. in New York from the SPDR Dow ETF, which at 9:03 a.m. suggested an opening loss of about 1,681 points or 6.5 percent from its close on Friday. Those projected losses, of course, could be stemmed before the market opens by news of liquidity injections. For example, the New York Fed announced before the market opened that it will increase its … Continue reading

Two Charts Explain Why Wall Street Banks Are Under So Much Selling Pressure

Deutsche Bank Trading Chart From February 14 through March 5, 2020 Versus Wall Street Banks and U.S. Insurers

By Pam Martens and Russ Martens: March 6, 2020 ~ Yesterday, the Dow Jones Industrial Average of 30 large cap companies closed with a loss of 969.5 points or 3.58 percent. That was bad enough but the losses among the biggest Wall Street banks outpaced the Dow losses by a significant margin. Typically, JPMorgan Chase is one of the better performers among the Wall Street banks in the midst of a big selloff. But not yesterday. It closed with a loss of 4.91 percent – a loss larger than Goldman Sachs (- 4.77 percent), which has a large criminal fine hanging over its head. The news that Jamie Dimon, Chairman and CEO of JPMorgan Chase, had heart surgery on Thursday was not reported until after the stock market had closed. The losses among the other mega banks on Wall Street yesterday were equally unsettling. Morgan Stanley lost 5.86 percent; Citigroup … Continue reading

Demand for Fed’s Repo Loans Surges Past $100 Billion a Day as 10-Year Treasury Hits Lowest Rate in 149 Years

By Pam Martens and Russ Martens: March 5, 2020 ~ Federal Reserve Chairman Jerome Powell certainly has an odd notion of what constitutes an “orderly” market. At his press conference on Tuesday, following the announcement that the Fed was cutting its Fed Funds rate by a half point without waiting for its regularly scheduled meeting when rate cuts are normally deliberated, Powell said that “financial markets are functioning in an orderly manner and all that sort of thing.” Challenging Powell’s assessment of “orderly,” the Dow dropped 603 points in the span of less than 30 minutes while he was speaking at his press conference and trying his best to bolster confidence in the market. That didn’t seem very orderly. On top of that, at 8:45 a.m. that very morning, the New York Fed had pumped $100 billion in 1-day repo loans into the trading houses on Wall Street, $8.6 billion … Continue reading

Timeline of How Fed Chair Powell Knocked 603 Points Off the Dow Yesterday

Federal Reserve Chair Jerome Powell

By Pam Martens and Russ Martens: March 4, 2020 ~ We write this with some trepidation that after this appears in print Federal Reserve Chairman Jerome Powell will stop taking questions at his press conferences or that all media questions will have to be routed through Vice President Mike Pence’s press office, as is now occurring with matters pertaining to the coronavirus. (We say that with only some facetiousness.) However, in this age of spin, facts matter more than ever. First, a little background. After losing 3600 points the prior week, the Dow Jones Industrial Average staged a monster rally (more likely a short squeeze) on Monday, climbing 1293 points to close at 26,703. At 1:34 a.m. (the wee hours of Tuesday morning) President Donald Trump posted a tweet to his Twitter page stating, among other things, that the Fed should ease and “cut rate big” adding that “Powell led … Continue reading

Central Bankers Can’t Save Us This Time

Federal Reserve Tries Wizardly to Cure Too-Big-To-Fail

By Pam Martens and Russ Martens: March 3, 2020 ~ There is a time for scientists and carefully vetted facts and a time for men who tell the public that everything is great, nothing to see here. It’s clearly a time for the former and less delusional chatter from the latter. The latest magical thinking is that if Fed Chairman Jerome Powell and U.S. Treasury Secretary Steve Mnuchin get on a phone call this morning with the other G7 finance ministers and central bank governors, they can seduce or strongarm the group to announce rate cuts or fiscal stimulus to keep stock markets from further steep declines and GDP from contracting. (For how this played out previously, we recommend Nomi Prins’ brilliant book, Collusion: How Central Bankers Rigged the World.) Unfortunately, the Fed Chair and the U.S. Treasury Secretary are fighting the last war, the financial crisis of 2008, when … Continue reading

Four Airline Stocks Lost $22 Billion in Value in Prior 7 Trading Sessions

By Pam Martens and Russ Martens: March 2, 2020 ~ The Dow Jones Industrial Average closed with a whopping 1293 points in the green today, after losing 3600 points last week. (It looked like a classic short squeeze driving up the market today.) But despite the monster move up in stocks, two of the major airline stocks closed in the red today: American Airlines and United Airlines. Delta and Southwest closed in the green. All four airlines, however, have been on a serious losing streak of late as fears over the coronavirus have spread. From their close on Wednesday, February 19, through last week, the four airlines have lost over $22 billion of their share value during those seven trading sessions. The biggest loser in percentage terms was American Airlines. It lost 34 percent of its market value or $4 billion. United Airlines lost 24.8 percent or $4.88 billion while … Continue reading

Washington State Announces 6 Dead of Coronavirus in Three Days

By Pam Martens and Russ Martens: March 2, 2020 ~ Ettore Palazzo, M.D., Chief Medical and Quality Officer for EvergreenHealth in Kirkland, Washington, announced that a total of six patients diagnosed with coronavirus COVID-19 have now died of the virus. One of the deaths had been reported on Saturday and a second death was reported on Sunday. Four more have now died since then. Five of the deaths were in King County with one additional death in Snohomish County. The King County Executive, Dow Constantine, said the county was in final negotiations to buy a motel to care for patients in need of isolation and recovery. He said the county was also going to be using modular housing in several locations around the county, including Seattle. Dr. Jeff Duchin, a Health Officer for Public Health in King County, spoke at the press conference and said the county now has 17 … Continue reading

OECD Releases Dire Outlook for Global Growth as a Result of Coronavirus

By Pam Martens and Russ Martens: March 2, 2020 ~ The Organization for Economic Co-operation and Development (OECD) has released a dire outlook for global economic growth this year as a result of the spread of the coronavirus Covid-19. Its latest Interim Economic Outlook provides both a best-case scenario, where the virus is broadly contained, as well as a scenario in which contagion spreads. The best-case scenario, which factors in limited spread outside China, will bring little cheer to world leaders. It projects global economic growth falling to 2.4 percent this year compared to an anemic global growth of just 2.9 percent last year. If there is wider spread of the virus around the globe, the OECD says global growth could be cut to as low as 1.5 percent – which would be just half of what the OECD was forecasting last November. The OECD also projected that some countries, … Continue reading

Watch NY Press Conference on First Coronavirus Case in Manhattan

Government officials in New York State and New York City convened a press conference to discuss the first case of coronavirus in Manhattan. Watch the press conference below.

Coronavirus: Washington State and Florida Declare Public Health Emergencies; Faulty Test Kits from CDC Under Investigation

Coronavirus COVID-19

By Pam Martens and Russ Martens: March 2, 2020 ~ Despite assurances from the Trump administration that the overall risk to Americans from the coronavirus is “low,” public concern grew over the weekend as New York State reported its first known case of the coronavirus in the most populous city in the country, New York City, where a woman in her 30s who had traveled to Iran tested presumptively positive, meaning the CDC still has to confirm the results. Also over the weekend, the first two deaths were reported in Washington State and new coronavirus cases were announced in Oregon, Rhode Island, and Florida. Other U.S. states with coronavirus cases include California, Illinois, Wisconsin, Arizona and Massachusetts. On Saturday, the Governor of Washington State declared a State of Emergency after a man there died from the virus after community transmission, and 50 residents and staff at a skilled nursing facility, … Continue reading

Why Would Goldman Sachs and BofA Throw Gasoline on the Stock Market Fire Yesterday?

Goldman Sachs and Bank of America Throw Gasoline on the Stock Market Fire

By Pam Martens and Russ Martens: February 28, 2020 ~ Going into Thursday morning, February 27, this was the situation on Wall Street: The stock market, as measured by the Dow Jones Industrial Average, had already lost a total of more than 2,000 points in the prior three days of trading; Stock futures were showing a big loss at the open of trading on Thursday; News reports had proliferated overnight of the coronavirus spreading around the globe as well as a case in California suggesting it was now loose in the community. For most folks, that would have been enough bad news to digest with their morning coffee. But it wasn’t for the folks at Goldman Sachs. At 8:12 a.m. yesterday morning, CNBC ran the above graphic and headline: “Goldman sees zero earnings growth for US companies this year because of coronavirus.” Bank of America also apparently felt it was … Continue reading

California Governor Rattles Stocks: A State with 40 Million Residents Has Just 200 Coronavirus Test Kits from the CDC

Governor Gavin Newsom of California Holds Press Conference on Coronavirus, February 27, 2020

By Pam Martens and Russ Martens: February 27, 2020 ~ The Dow Jones Industrial Average was down by 960 points this morning and then began to stage a strong rally. That rally unraveled on news that came out of the press conference held by California Governor Gavin Newsom. The Governor, a Democrat, seemed to go out of his way to stress that his administration has been working closely with the Trump administration in addressing the coronavirus outbreak. He refused to criticize Trump when questioned by reporters. What did become quite clear, however, as reporters drilled down to the situation on the ground in California, is that the state has taken in 800 repatriated Americans from countries with coronavirus outbreaks, has received thousands more passengers on domestic flights from suspect countries, while it currently has just 200 tests kits from the CDC to test for the virus. Newsom told reporters that … Continue reading

Jamie Dimon’s Remarks on Discount Window Add to Market Panic

Jamie Dimon, Chairman and CEO of JPMorgan Chase

By Pam Martens and Russ Martens: February 27, 2020 ~ During the financial panic of 1907, John Pierpont Morgan corralled the money men of New York together and convinced them to join him in bailing out teetering financial institutions in order to calm the panic in the markets. His plan worked. Flash forward to today. Jamie Dimon is Chairman and CEO of the bank that bears John Pierpont Morgan’s name: JPMorgan Chase. The bank is the largest federally-insured bank in the U.S. with $1.6 trillion in deposits. It has more than 5,000 bank branches across America accepting the life savings of moms and pops. But JPMorgan Chase is also the largest trading and derivatives house on Wall Street – a dangerous, combustible mix as it proved so well in 2012 when it lost $6.2 billion of depositors’ money making wild gambles in derivatives in London. On Tuesday of this week, … Continue reading

Fed’s Stress Tests on Banks Should Have Factored in a Pandemic

Federal Reserve Building in Washington, D.C.

By Pam Martens and Russ Martens: February 26, 2020 ~ Each year the Federal Reserve comes up with a hypothetical, severely adverse economic scenario against which it evaluates the ability of Wall Street’s mega banks to weather the storm. Called “stress tests,” this year’s severely adverse scenario features a severe global recession, unemployment of 10 percent, elevated stress in corporate debt markets and commercial real estate, along with a bank’s major counterparty defaulting if it has significant derivatives trading exposures. The stress test results are typically disclosed in June by the Fed with an immediate announcement by the banks (that get the green light from the Fed) about how many billions of dollars they plan to spend on stock buybacks and dividend increases to artificially boost their share prices. What the Federal Reserve has not planned for in its stress test is a global recession (which was looking entirely likely … Continue reading

Wall Street Banks, Insurers Sell Off — Dangerously Linked by Derivative Trades

Wall Street Bank Logos

By Pam Martens and Russ Martens: February 25, 2020 ~ If the federal government wants to quarantine the most dangerous threat to the financial health of the United States, it will impose a lockdown and decontamination of the federally-insured banks that are holding tens of trillions of dollars in derivative trades. Yesterday, the stock market rout outed the worst of these actors. While the Dow Jones Industrial Average fell a hefty 1,031.61 points, that was only a 3.56 percentage point loss. The S&P 500 was off by 3.35 percent. The decline in the broader averages looks tame compared to what happened to some of the biggest banks on Wall Street and their derivative counterparties. Morgan Stanley tanked by 5.23 percent; Citigroup was off by 5.12 percent; while Bank of America closed down 4.74 percent. JPMorgan Chase and Goldman Sachs magically trimmed their losses during the trading day, closing down 2.69 … Continue reading