BIS Drops a Bombshell: Four U.S. Mega Banks Are Core of Repo Loan Crisis

Five U.S. Mega Banks Are Highly Interconnected

By Pam Martens and Russ Martens: December 9, 2019  Yesterday, the Bank for International Settlements (BIS) dropped a bombshell report that torpedoed the Federal Reserve’s official narrative on what has caused the overnight lending market (repo loan market) on Wall Street to seize up since September 17, leading to more than $3 trillion in cumulative loans from the New York Fed as lender of last resort. The Federal Reserve has said the repo crisis was a result of corporations draining liquidity from the system to pay their quarterly tax payments alongside a large auction of U.S. Treasury securities settling and adding to the cash drain. That excuse was clearly bogus since the Fed has provided hundreds of billions of dollars weekly into the repo market since September 17, while stating that it plans to continue this activity into next year. The BIS report dropped the bombshell that the “US repo … Continue reading

Bombshell Report: The Fed Has Not Rejected One Bank Merger Application Out of 3800 Submitted in Past 11 Years

Jerome Powell, Chairman of the Federal Reserve

By Pam Martens and Russ Martens: December 6, 2019 ~ In advance of its December 4 hearing to question if federal bank regulators are adequately watching over the nation’s banks, the House Financial Services Committee issued a Memorandum on some of the key concerns. Buried on page three of the Memorandum was this bombshell: “Concerns have been raised about federal financial regulators rubber stamping prior merger and acquisition applications. For example, based on data provided by the Federal Reserve, from January 1, 2006 through December 31, 2017, over 3,800 merger applications were submitted to the agency. During this eleven-year period, however, the Federal Reserve did not reject any merger application. On November 20, the Federal Reserve and FDIC granted approval of the merger between BB&T and SunTrust, creating the sixth-largest bank in the United States.” What is not mentioned in that paragraph is that during that 11-year period, the biggest … Continue reading

Federal Reserve V.P. Grilled at House Hearing on Hundreds of Billions in Fed Loans to Wall Street

Randal Quarles

By Pam Martens and Russ Martens: December 5, 2019 ~ While the Democrats focused on the continuing predatory practices of U.S. banks and the Federal Reserve’s coziness with those same banks, three Republicans at yesterday’s House Financial Services Committee hearing delved into why the Federal Reserve is showering Wall Street’s trading houses with super cheap loans on the pretext that it’s simply part of the Fed’s routine monetary operations. Since September 17, the Federal Reserve, through its New York Fed branch, has been funneling hundreds of billions of dollars each week to Wall Street’s trading houses, intervening in what had been a private overnight lending operation (called repurchase agreements or repo loans) between banks and other financial institutions. Since September 17, the Fed loans have grown in both size and duration with some loans extended out as far as 42 days – suggesting to many on Wall Street that there … Continue reading

In the Midst of the Biggest Wall Street Bailout Since the Financial Crisis, the Fed Presents Alice-in-Wonderland Testimony for Today’s House Hearing

Federal Reserve Building in Washington, D.C.

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

Is the Fed’s $3 Trillion in Loans to Trading Houses on Wall Street Legal?

Randal Quarles, Vice Chairman for Supervision, Federal Reserve

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

The New York Fed Has Some Explaining to Do Over Morgan Stanley’s Unreported Trading Losses

James Gorman, Chairman and CEO Morgan Stanley (Thumbnail)

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

“Intra-day Bankruptcy”: A 2008 Email from the Fed Provides Insight into Today’s Overnight Repo Scare

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

It’s Official: JPMorgan Chase Is the Riskiest Big Bank in the U.S.

JPMorgan Chase Building

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

The Disturbing Advance Men for the Fed’s $3 Trillion (and Counting) Wall Street Bailout

Marketplace, an American Public Media Program Interviews Timothy Geithner, Hank Paulson and Ben Bernanke in March 2018

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

This Chart Shows How the Fed Has Spooked the Commercial Paper Market

Federal Reserve Building in Washington, D.C.

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

These Are the Banks that Own the New York Fed and Its Money Button

New York Fed Headquarters Building in Lower Manhattan

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

If the Fed Is Bailing Out the Repo Market, Can Commercial Paper Be Far Behind?

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

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

As Fed Pumps $3 Trillion into Repo Market, Morgan Stanley and Goldman Sachs Practice Borrowing from the Fed’s Discount Window

ames Gorman (left) Chairman and CEO, Morgan Stanley; David Solomon (right) Chairman and CEO, Goldman Sachs

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

Fed’s Powell Says Forensic Work Ongoing on Liquidity Crisis; This Chart Shows Why He’s Worried

Deutsche Bank, Goldman Sachs, Lincoln Financial Stock Price, September 17, 2019 to November 14, 2019

By Pam Martens and Russ Martens: November 15, 2019 ~ Yesterday, for the second day in a row, the Chairman of the Federal Reserve, Jerome Powell, gave testimony and took questions before a Congressional Committee. On Wednesday it was the Joint Economic Committee; yesterday it was the House Budget Committee. On both days, only one member of the Committee dared to ask a question about the hundreds of billions of dollars the Fed is hurling at Wall Street each week in repo loans. The crisis in the repo loan market, where financial institutions make overnight loans to each other, began on September 17 when the interest rate spiked from the typical range of 2 percent to 10 percent. For the first time since the financial crisis, the Federal Reserve had to step in with lots of cash to ease the liquidity stresses. The Fed has continued to offer that cash … Continue reading

The Fed Has Created the Big Lie for Congress on its Repo Loans while the New York Fed Blocks Freedom of Information Requests

Fed Chairman Jerome Powell (Thumbnail)

By Pam Martens and Russ Martens: November 14, 2019 ~ Yesterday Federal Reserve Chairman Jerome Powell testified before the Joint Economic Committee of Congress. Only one Congressman, Kenny Marchant (R-TX), had the courage to ask Powell about the Fed’s intervention in the repo loan market beginning on September 17. Since that time the Fed has been pumping hundreds of billions of dollars each week (that the New York Fed creates electronically out of thin air) into its 24 primary dealers on Wall Street. These primary dealers are not commercial banks that might be inclined to use the funds to make loans to local businesses or to consumers to buy a house and help their local economies. No, 23 of the 24 primary dealers are stock brokerage firms and investment banks that engage in leveraged bets in the stock, bond, commodities, and derivatives markets. The 24th is a foreign bank. (See … Continue reading

JPMorgan Has Radically Changed Its Balance Sheet, Shrinking Its Cash at the Fed by $145 Billion

JPMorgan Chase Building

By Pam Martens and Russ Martens: November 13, 2019 ~ JPMorgan Chase is not a bank that federal regulators can simply put on autopilot and hope for the best. When the U.S. Senate’s Permanent Subcommittee on Investigations conducted a formal probe into how the bank lost $6.2 billion of its federally-insured bank’s deposits by gambling in derivatives in London in 2012, the Chair of the subcommittee, former Senator Carl Levin, said that the bank had “piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public.” Over the past five years, the bank has admitted to three criminal felony charges brought by the U.S. Department of Justice and is currently under an ongoing criminal probe by federal prosecutors over charges that its traders ran an eight-year criminal enterprise out of its precious metals trading desk in New York. But it seems that the Federal … Continue reading

This Fed President Thinks Wall Street Banks Should Stop Whining for the Fed to Bail Them Out and Plan for their Own Liquidity

By Pam Martens and Russ Martens: November 12, 2019 ~ Later this afternoon, Neel Kashkari, the outspoken President of the Federal Reserve Bank of Minneapolis, will deliver the keynote address at a conference on “Wisconsin and the National Economy” at the Madison campus of the University of Wisconsin. Tomorrow, he’ll be taking questions at a Town Hall in the University of Wisconsin’s Student Union on the La Crosse campus. Given Kashkari’s recent remarks on his lack of sympathy for the whining New York bankers who are demanding a liquidity bailout from the Fed – and on their own terms – we’ll be watching closely to see what he has to say today and tomorrow. Last month Kashkari gave a harsh and candid interview with Yahoo! Finance (see YouTube video clip below) about the complaints from New York bankers that the New York Fed was tardy in riding to rescue the … Continue reading

The Fed’s Repo Bailout and JPMorgan’s 38 Trading Floors

Jamie Dimon Sits in Front of Trading Monitor in his Office (Source -- 60 Minutes Interview, November 10, 2019)

By Pam Martens and Russ Martens: November 11, 2019 ~ Since September 17 of this year, the central bank of the United States, the Federal Reserve, has been pumping hundreds of billions of dollars each week to unnamed trading firms on Wall Street. We know the loans are going to trading firms because the loans are being made to the 24 primary dealers (see list below) with whom the New York Fed conducts open market operations. (The list includes one foreign bank and 23 stock brokerage houses and investment banks.) The New York Fed has publicly disclosed that the loans are going to primary dealers but will not say which firms are getting the bulk of the money. The Fed did something very similar to this under a facility it called the Primary Dealer Credit Facility (PDCF) during the financial crisis. It kept the names of the firms getting the … Continue reading

Jamie Dimon Tells 60 Minutes He’s a Patriot; There’s Good Reason to Think He’s a Crime Boss

Is Jamie Dimon a Patriot

By Pam Martens and Russ Martens: November 10, 2019 ~ Jamie Dimon was interviewed by Lesley Stahl this evening on the CBS investigative news program, 60 Minutes. The gist of Dimon’s argument is that candidates for President, such as Senator Elizabeth Warren, should stop vilifying him simply because he’s “successful.” Dimon also wants the public to know that it’s “dead wrong” to think he’s not a “patriot.” Dimon is a bit more than “successful” when it comes to the pile of money he has accumulated. According to Forbes, Dimon is worth $1.6 billion. The bulk of that money has come from stock grants while serving as Chief Executive Officer of the largest bank in the U.S., JPMorgan Chase, since December 31, 2005 as well as Chairman of the Board since December 31, 2006. Unfortunately, there is a very substantive argument against Dimon being a patriot and a very persuasive argument … Continue reading

This Federal Agency Is Investigating Why the Fed Is Bailing Out Wall Street Again

Jelena McWilliams, Chair of the FDIC

By Pam Martens and Russ Martens: November 8, 2019 ~ Jelena McWilliams is a Trump appointee who currently serves as the Chairwoman of the Federal Deposit Insurance Corporation (FDIC), the federal agency responsible for insuring the deposits of commercial banks and savings associations in the United States. McWilliams also knows her way around Wall Street. Her resume at the FDIC states that “Before entering public service, she practiced corporate and securities law at Morrison & Foerster LLP in Palo Alto, California, and Hogan & Hartson LLP (now Hogan Lovells LLP) in Washington, D.C.” As a corporate lawyer, McWilliams “represented publicly and privately-held companies in mergers and acquisitions, securities offerings, strategic business ventures, venture capital investments, and general corporate matters.” McWilliams put her Wall Street savvy to work from 2012 to 2017 in the positions of deputy staff director, chief counsel and senior counsel to the U.S. Senate Banking Committee where … Continue reading

Wall Street’s Liquidity Crisis: It’s Not Getting Better

Deutsche Bank Thumbnail

By Pam Martens and Russ Martens: November 7, 2019 ~ This morning, Wall Street’s money spigot arm of the Federal Reserve, the New York Fed, paid out $35 billion in 14-day term loans to Wall Street’s trading houses. The problem was, this morning the banks wanted $41.15 billion or $6.15 billion more than the Fed was offering. That’s a very clear sign that liquidity remains tight on Wall Street and we have yet to enter the pivotal year-end period when banks try to dress up their books by dumping or parking their most toxic positions. Between the term loan and the overnight loan, the New York Fed paid out $115 billion this morning to unnamed securities firms on Wall Street. (The Fed won’t say who is doing all of this borrowing and Congress can’t summon the willpower to hold a hearing.)  According to the most recent schedule provided by the … Continue reading

Dangerous Liaisons: New York Fed and JPMorgan’s Incestuous Relationship

New York Fed Headquarters Building in Lower Manhattan

By Pam Martens and Russ Martens: November 6, 2019 ~ The Federal Reserve Bank of New York (New York Fed) is just one of the 12 regional Federal Reserve banks around the country. But it has amassed enormous powers for itself since the Federal Reserve was created in 1913. Three of those powers dwarf all others: the ability to create money electronically at the push of a button; the accepted right to meddle in the markets; and the supervision of some of the largest bank holding companies in America. After Wall Street blew itself up under the indulging and incompetent supervision of the New York Fed in 2008 and it was exposed that the Fed had secretly created $29 trillion in electronic money to bail out zombie banks – most of that funneled out by the New York Fed – most rational folks would have assumed that Congress would have … Continue reading

The Fed’s Wall Street Bailout May Go into Overdrive in December

Jerome Powell, Chairman of the Federal Reserve

By Pam Martens and Russ Martens: November 5, 2019 ~ The Fed is in deep fear, while also in deep denial, about what happened last December. Its fear is that it could happen again this December. Its denial is that its lax supervision of the Wall Street mega banks is largely responsible for the mess. The stock market news on December 24 of last year was not what folks want to be reading about on Christmas Eve. The Dow Jones Industrial Average had plunged 653 points on Christmas Eve and headline writers across major media were declaring the month to have been the worst December for stocks since the Great Depression. But the declines in the broader stock market averages paled in comparison to the December carnage that occurred in the share prices of the mega banks on Wall Street and, to the Fed’s consternation, the insurance companies that are … Continue reading

As the Fed Throws Hundreds of Billions a Week at Wall Street Banks for Liquidity, JPMorgan’s IIF Can Afford to Buy El Paso Electric

By Pam Martens and Russ Martens: November 4, 2019 ~ David Dayen of American Prospect has a must-read article. The headline and subhead read: “JPMorgan Gets Back Into the Electricity Business: An El Paso, Texas, electric utility is being purchased by an investment fund with deep, undisclosed ties to the big bank.” Dayen is not buying into the idea that it’s an investment fund at JPMorgan that’s buying El Paso Electric, a publicly traded electric utility, but that the deal is simply being “laundered through an allegedly independent investment fund,” due to the fact that “48 executives of the investment fund are actually paid employees of JPMorgan….” Why wouldn’t JPMorgan Chase want to admit that it plans to make an outright purchase of an electric utility company serving 429,000 customers in Texas and New Mexico? For starters, the bank has been charged, and admitted to, three criminal felony counts within … Continue reading

McDonald’s CEO Gets Fired for Relationship with Subordinate; Jamie Dimon Survives Three Felony Counts and an Organized Crime Trading Desk Charge

Steve Easterbrook, Fired CEO of McDonald's

By Pam Martens and Russ Martens: November 4, 2019 ~ Corporate America is increasingly sending conflicting messages to its top executives: engaging in relationships with subordinates, consensual or otherwise, will cost you your job – but criminal acts involving looting the public, not so much. Steve Easterbrook, the CEO of the fast food chain, McDonald’s, was fired by his Board yesterday for engaging in a consensual relationship with an employee, in violation of company policy. The Board of the largest bank in the United States, on the other hand, JPMorgan Chase, has not fired its Chairman and CEO, Jamie Dimon, despite the following occurring on his watch: $6.2 billion in losses from a high-risk gamble with derivatives in London in 2012 – using, mind you, the deposits of its federally-insured bank. Then came 2014 when the bank was charged for its role in the Bernie Madoff Ponzi scheme. The Madoff … Continue reading