By Pam Martens: November 13, 2014 On November 6, Bloomberg News reporter, Matthew Boesler, set off a flurry of comments with an article headlined: “Fed Concern With Repeat of 1937 Blunder Echoed by Markets.” The reference to 1937 relates to the fact that as the U.S. economy was showing signs of improvement from the conditions of the Great Depression of the 1930s, the Federal government and the Federal Reserve overreacted to inflationary concerns with contractive measures in 1937, sending the economy into a sharp slump in late 1937 and 1938. The chief worrier at the Fed about it making the same mistake today is Charles Evans, President of the Federal Reserve Bank of Chicago. Evans’ background is that of a long-term researcher. Prior to becoming President of the Chicago Fed, he served as its Director of Research, and earlier, its Senior Economist in charge of the Macroeconomics Research Group. In … Continue reading →

By Pam Martens: November 12, 2014 Two U.S. and three foreign banks have been charged with rigging the foreign exchange market where $5.3 trillion changes hands daily and have settled civil claims for $3.3 billion. (The charges are very similar to those in the rigging of the international interest rate benchmark known as Libor.) Additional charges and settlements by other regulators are expected to follow before the end of the year. The U.S.-based Commodity Futures Trading Commission (CFTC) levied a total of over $1.4 billion in fines against JPMorgan, Citigroup, UBS, HSBC and RBS. The same five banks were fined $1.7 billion by the U.K.’s Financial Conduct Authority (FCA). Swiss regulator FINMA charged only UBS with a fine of $139 million and included rigging of precious metals trading along with rigging foreign exchange. While the details that were released are skimpy and the Financial Conduct Authority is already being criticized … Continue reading →

By Pam Martens: November 11, 2014 Apparently, not one of the global regulators pushing the latest plan to prevent another taxpayer bailout of the over-leveraged, globe-trotting banking behemoths that crashed the financial system in 2008 ever worked a day on Wall Street or sat behind a trading terminal during the crisis. If one had, he would have exposed this plan immediately as an exercise in illusory thinking – effectively, the same framework on which global banking currently exists. Yesterday, the Financial Stability Board, established in 2009 to coordinate financial regulatory proposals on behalf of the Group of 20 major economies (G-20), released a proposal that is being promoted as a means of ending taxpayer bailouts of too-big-to-fail banks. These 30 banks are known as G-SIBs, or Global Systemically Important Banks. But the proposal does nothing to address the “systemic” danger of these banks, thus the proposal is nothing more than … Continue reading →

By Pam Martens: November 10, 2014 Two years after attorney Alayne Fleischmann was downsized out of her job as a Transaction Manager at JPMorgan Chase, her boss, William Buell, was hauled before the Financial Crisis Inquiry Commission (FCIC) for interrogation on just how culpable the bank was in packaging and selling toxic mortgage backed securities. Buell is the same man that Fleischmann exposed in a Rolling Stone feature article by Matt Taibbi last week as the recipient of her detailed, internal letter in early 2007, warning him that the mortgage pools her group was reviewing contained poor quality mortgage loans unfit for purchase or securitization. Despite the written warning, Fleischmann would later learn that JPMorgan, in a drive to boost market share and profits, went forward and purchased the pool, securitized many of the loans, then sold them to unsuspecting investors. But when Buell was asked directly during his questioning … Continue reading →

By Pam Martens: November 6, 2014  Remember the Senate hearing on June 18 when Senator Elizabeth Warren talked about the high frequency trading firm, Virtu, reporting in its IPO prospectus that it had been trading for 1,238 days and made money on 1,237 of those days. Last week three futures traders told a Federal court in Chicago that it’s not just the high frequency trading firms that are reaping a windfall but the exchanges who are engaged in a conspiracy with them to create “guaranteed winners and guaranteed losers.” The original lawsuit was filed on April 11 against the CME Group and four of its officials in the U.S. District Court for the Northern District of Illinois. The CME Group owns the Chicago Mercantile Exchange (CME), the largest futures exchange in the world. Terrence (Terry) Duffy, the Executive Chairman and President of the CME Group, a man who has testified … Continue reading →

By Pam Martens and Russ Martens: November 5, 2014 On January 6 of this year, JPMorgan Chase entered into a two-year probation agreement known as a “deferred prosecution” agreement with the U.S. Justice Department. The deal allowed JPMorgan to avoid prosecution for two felony counts related to its failures in serving as Bernard Madoff’s bank as tens of billions of dollars were laundered between accounts while it made none of the required suspicious activity reports – except one to the United Kingdom. The deferred prosecution agreement, signed on January 6, 2014, required that for the next two years, JPMorgan had to bring to the attention of Federal prosecutors any knowledge of wrongdoing inside the bank, cooperate fully and in good faith, and agree to “commit no crimes under the federal laws of the United States subsequent to the execution of this agreement…” If JPMorgan broke its end of the bargain, … Continue reading →

By Pam Martens and Russ Martens: November 4, 2014  Economist and New York Times columnist Paul Krugman has been showering praise on the current administration for shrinking the budget deficit while scolding the press for failure to adequately report it: “where are the front-page news reports?” he writes on October 9. The media has been duly pressed into action with Bloomberg News reporting a big headline today on its digital front page: “U.S. Deficit Decline to 2.8% of GDP Is Unprecedented Turn.” But here’s a missing detail that carries a dark side: Over the past six years, $400 billion of deficit reduction has had nothing to do with Congress or the President and everything to do with those savvy traders sitting behind their Bloomberg terminals with their speed dials to Wall Street at the New York Fed. Like every other regional Federal Reserve Bank, the New York Fed, by law, … Continue reading →

By Pam Martens and Russ Martens: November 3, 2014 The Federal Reserve Board of Governors in Washington, D.C., which functions as the central bank of the United States, has farmed out much of its Quantitative Easing (QE) programs to the Federal Reserve Bank of New York since the financial crisis of 2008. The Federal Reserve Bank of New York has, in turn, contractually farmed out a hefty chunk of the logistics of that work to JPMorgan Chase in the last six years. Sitting quietly on the Federal Reserve Bank of New York’s web site is a vendor agreement and other documents indicating that JPMorgan Chase holds all of the Mortgage Backed Securities (MBS) that the New York Fed has purchased under its various Quantitative Easing programs. As of last Wednesday, that figure was $1.7 trillion dollars. (The New York Fed has confirmed that JPMorgan is custodian for these assets.) In … Continue reading →

By Pam Martens and Russ Martens: October 30, 2014  Back on June 25 of this year, Wall Street On Parade ran the following headline: “BOE’s Carney: Inflated Central Bank Balance Sheet the New Normal; Expect to Hear the Same Conclusion from the U.S. Fed.” The day before our headline, Bank of England Governor, Mark Carney, had just explained to Parliament why their central bank’s balance sheet, bloated through quantitative easing, was not going to be shrinking anytime soon. Carney: “…I would define – picking up on what my colleagues have said – pre-crisis position as a position that’s consistent with the normal course of liquidity requirements of the banking system…What has changed, to the good, in terms of the banking system here is that through regulation and supervision we have put much more responsibility on the banks themselves to hold liquidity to manage liquidity shocks. And, as a consequence of … Continue reading →

By Pam Martens: October 29, 2014 It appears that Senators Elizabeth Warren and Sherrod Brown believe they may have a battle on their hands getting their colleagues on the Senate Banking Committee to agree to hold hearings on the now notorious tape recordings secretly made by former New York Fed bank examiner, Carmen Segarra, showing a cozy relationship between the regulator and Goldman Sachs. Petitions have sprung up all over the internet, with more than 129,000 signatures as of this morning, demanding that Congress hold hearings to investigate whether the Federal Reserve System, and specifically the New York Fed, function as merely sycophantic fronts for Wall Street or if they serve any meaningful regulatory role. In addition to petitions at Credo, MoveOn.org and Public Citizen, campaign sites for Senators Warren and Brown have also set up petitions, but those sites do not show how many signatures have been collected. As … Continue reading →