Search Results for: Federal Reserve

By Pam Martens and Russ Martens: May 18, 2022 ~ The March 15-16 minutes of the Federal Open Market Committee (FOMC) of the Federal Reserve show that there was agreement, given “elevated inflation and tight labor market conditions,” that the Fed needed to take decisive action to shrink its balance sheet, with FOMC participants reaffirming “that the Federal Reserve’s securities holdings should be reduced over time in a predictable manner primarily by adjusting the amounts reinvested of principal payments….” But Jerome Powell’s Fed did not actually announce a specific plan to shrink its balance sheet until May 4 and stated at that time that the plan would not go into effect until June 1 – almost three months after the FOMC indicated that the Fed should take decisive action. As a result of this stalling, the Fed’s balance sheet has remained at the $9 trillion level since its March 15-16 FOMC … Continue reading →

By Pam Martens and Russ Martens: May 17, 2022 ~ Tongues are wagging this morning about the 13F filing by Warren Buffett’s Berkshire Hathaway. The filing shows that in the first quarter of this year, Berkshire Hathaway bought 55,155,797 shares of Citigroup stock for its portfolio, which came to the tidy sum of $2.9 billion as of March 31, 2022. The tongue-wagging stems from the fact that over the past 52 weeks, Citigroup’s stock has lost 40 percent of its value, with no sign that the bleeding will stop anytime soon. Citigroup closed at $53.40 a share on March 31. It closed yesterday at $47.46. That means that Buffett’s wager on Citigroup is down 11 percent or a loss of $327.6 million so far. Knowing Citigroup’s history, things are highly likely to go from bad to worse from here. As Wall Street On Parade reported just last Friday, Citigroup’s Stock Price … Continue reading →

By Pam Martens and Russ Martens: May 13, 2022 ~ On January 2, 2008, the first trading day of the year that would become the biggest Wall Street crash since the Great Depression, Citigroup’s shares closed at $28.92. Yesterday, Citigroup’s shares closed at $4.66 (adjusted for the 1-for-10 reverse stock split the company did on May 9, 2011). That means that shareholders who have hung on to the stock for the past 14 years are still down 84 percent. In terms of assets, Citigroup is the third largest bank holding company in the U.S. with $2.29 trillion in assets as of December 31, 2021. (JPMorgan Chase and Bank of America rank first and second with $3.7 trillion and $3.2 trillion in assets, respectively, as of the same date according to the Office of the Comptroller of the Currency.) Despite the fact that Citigroup blew itself up in 2008 with off-balance-sheet subprime … Continue reading →

By Pam Martens and Russ Martens: May 12, 2022 ~ Yesterday, Thomas Falk and Claudia Aguirre, who were co-chairing the Dallas Fed’s Search Committee, announced that they had found the ideal candidate to become the new Dallas Fed President. They said it was a person who would “understand the economic issues and needs of the residents of Texas, northern Louisiana and southern New Mexico,” the areas served by the Dallas Fed. Given that criteria, one might have suspected that their candidate would have some relationship with Texas or its neighboring states. But no. Falk and Aguirre selected a person who works 1500 miles from the Dallas Fed, Lorie Logan, the head of the trading desks for the New York Fed, the only one of the 12 regional Fed banks to have trading desks (one in New York near the New York Stock Exchange and one in Chicago near the futures exchange). … Continue reading →

By Pam Martens and Russ Martens: May 9, 2022 ~ Beginning in November of 2008, the Fed was allowed by Congress to manipulate the U.S. bond market through purchases of bonds with money it creates at the flick of an electronic button. The Fed calls this “Quantitative Easing” or QE.  Beginning on September 17, 2019 – when overnight lending rates on repo (repo means repurchase agreements between financial institutions) touched 10 percent instead of the 2-1/2 percent that the Fed wanted the market to be at – the Fed began providing repo loans at “administered rates.” It did that by jumping into the repo market with both feet, proceeding to make trillions of dollars in cumulative loans to trading houses on Wall Street, at interest rates as low as 0.10 percent by the spring of 2020. During 2020, the Fed also artificially propped up money market mutual funds, commercial paper, Exchange … Continue reading →

By Pam Martens: May 5, 2022 ~ At the Fed’s press conference yesterday, Federal Reserve Chair Pro Tempore Jerome Powell was asked by Mike McKee of Bloomberg Television a series of questions on monetary policy which ended with this: “Are you concerned about Fed credibility with the American people?” Powell answered the monetary policy questions but did not directly address the credibility issue. McKee then repeated the question, phrased as follows: “Do you think the Fed has a credibility problem?” Powell’s answer provides an alarming insight into with whom the Fed seeks to maintain confidence. Powell said this: Powell: “No. I don’t. A good example of why would be that—so in the fourth quarter of last year, as we started talking about tapering sooner and then raising rates this year, you saw financial markets reacting, you know, very appropriately. Not to bless any particular day’s measure, but the way financial markets—you … Continue reading →

By Pam Martens and Russ Martens: May 4, 2022 ~ The Federal Open Market Committee (FOMC) will release its decision on hiking the Fed’s benchmark interest rate at 2:00 p.m. ET today, along with its plans for shrinking the Fed’s $9 trillion balance sheet. The announcement will be followed with Fed Chair Pro Tempore Jerome Powell holding a press conference at 2:30 p.m. ET. (Powell still awaits full Senate confirmation for a second term as Fed Chair, thus the designation “Pro Tempore.” Wall Street is expecting a 50-basis point rate hike (half of one percent), which would put the Fed Funds rate in a range of 0.75 to 1 percent. Wall Street does not like large interest rate increases from the Fed because five of the megabanks are sitting with a $200 trillion albatross of derivatives around their neck with questionable counterparties on the other side of a lot of those … Continue reading →

By Pam Martens and Russ Martens: May 3, 2022 ~ Yesterday the international newswire, Reuters, broke the story that the U.S. megabank, Citigroup, was responsible for a flash crash that plunged Sweden’s benchmark index, the OMX, by 8 percent at its low. The index later recovered to close with a loss of just under 2 percent. The plunge caused a rapid ripple effect that briefly spread to other European stock markets. Trading volume in Europe was lower than normal yesterday because the London Stock Exchange was closed for a banking holiday. (As detailed below, Citigroup previously exploited a low volume day in August 2004 in the European bond market.) Citigroup has confirmed its role in yesterday’s flash crash, releasing the following statement on Monday: “This morning one of our traders made an error when inputting a transaction. Within minutes, we identified the error and corrected it.” El Pais, a leading newspaper … Continue reading →

By Pam Martens and Russ Martens: April 25, 2022 The Federal Reserve (the Fed) is the central bank of the United States. It sets monetary policy, including control of the benchmark short-term interest rate known as the Federal Funds rate, or in Wall Street jargon, the “Fed Funds” rate. This is a key rate because it signals the rate at which overnight loans are made between financial institutions and the direction of interest rates in general. Unfortunately, over time, the Fed has also been granted a supervisory role by Congress over Wall Street’s megabanks alongside its ability to bail them out when its crony brand of supervision fails. There was an epic failure in the Fed’s supervision of the Wall Street megabanks in the leadup to the 2008 financial crash and the September 2019 repo blowup. In both cases, the Fed made trillions of dollars in cumulative loans at below-market interest … Continue reading →

By Pam Martens and Russ Martens: April 21, 2022 On September 7 of last year, Wall Street Journal reporter Mike Derby broke the story that “Federal Reserve Bank of Dallas President Robert Kaplan made multiple million-dollar-plus stock trades in 2020, according to a financial disclosure form provided by his bank….” Kaplan was a sophisticated trader who previously worked at Goldman Sachs for 22 years, rising to the rank of Vice Chairman. His financial disclosure forms suggest that Kaplan maintained a trading relationship with Goldman Sachs, since he lists proprietary products created by “GS,” short for Goldman Sachs. It would be highly inappropriate for Kaplan to have a trading relationship with Goldman Sachs since it is a bank holding company supervised by the Fed. The strange thing about Derby’s reporting on Kaplan is that it didn’t capture the most scandalous aspect of Kaplan’s trading. According to Kaplan’s financial disclosure forms, he was … Continue reading →