Search Results for: stress test

By Pam Martens and Russ Martens: February 29, 2024 ~ On Tuesday, the Vice Chair for Supervision at the Federal Reserve, Michael Barr, delivered a speech at a risk management conference in Manhattan. Barr’s objective was to convince conference attendees that the Fed has its eye on the ball when it comes to Wall Street mega banks and their counterparties who are sitting on the opposite sides of derivative trades totaling tens of trillions of dollars. (Yes, trillions.) The most illuminating and dangerous elements of Barr’s speech are what he didn’t say. To remind attendees of what could happen if counterparty risks were not managed properly, Barr cited Long Term Capital Management (LTCM) and Archegos Capital Management. LTCM was a hedge fund stocked with the so-called “smartest men in the room,” including two Nobel laureates, who fed mathematical formulas into computers that generated trades using astronomical levels of leverage. Of course, this … Continue reading →

By Pam Martens and Russ Martens: January 25, 2024 ~ Last Thursday, 12 Democrats in the U.S. Senate sent a deeply insightful letter on a subject most Americans have never discussed around their kitchen table: adequate capital levels at the Wall Street mega banks that came close to bringing down the U.S. financial system in 2008. Before that financial crisis was over – the worst since the Great Depression of the 1930s – millions of hardworking Americans had lost their jobs and millions more had their homes taken in foreclosure. If the U.S. is going to avoid a replay of that crisis, Americans are going to have to start having these critical conversations about the structure of Wall Street mega banks around the kitchen table. Americans are going to have to start engaging in the battle to shape the future of American democracy and more equitable wealth distribution, which requires dramatic reform … Continue reading →

By Pam Martens and Russ Martens: July 11, 2023 ~ The polling organization, Gallup, conducted a survey between June 1-22 to update its annual poll that measures the confidence that Americans have in key U.S. institutions. Banks, as might be expected, continued their downward trend, registering an abysmal 26 percent of Americans who have “a great deal” or “fair amount” of confidence in the banks. That confidence ranking stood at 27 percent last year and at 33 percent in 2021. It is actually somewhat baffling that confidence in banks only dropped by one percentage point from last year, given that the second, third and fourth largest bank failures in U.S. history occurred in the first half of this year. Measured against a longer time horizon, confidence in U.S. banks looks far worse. In 1979, the Gallup poll showed 60 percent of Americans had confidence in the banks. In the years prior … Continue reading →

By Pam Martens and Russ Martens: May 31, 2023 ~ Last Friday, at the start of Memorial Day weekend, researchers at the International Monetary Fund (IMF) released an analysis of where they think the U.S. economy is headed and the headwinds (read gale force winds) that can, potentially, be expected along the way. Folks on Wall Street who were hoping that the Fed was at the end of its rate-hiking cycle, with a more dovish Fed juicing stock market returns later this year, likely had their holiday weekend ruined with this projection from the IMF: “Achieving a sustained disinflation will necessitate a loosening of labor market conditions that, so far, has not been evident in the data. To bring inflation firmly back to target will require an extended period of tight monetary policy, with the federal funds rate remaining at 5¼–5½ percent until late in 2024.” The Fed’s inflation target is … Continue reading →

By Pam Martens and Russ Martens: March 20, 2023 ~ Yesterday, the Swiss banking giant, UBS, agreed to a shotgun wedding with its collapsing long-time Swiss rival, Credit Suisse. Switzerland has committed $173 billion in loans and guarantees to the combined firm. A key player in this deal was the central bank of Switzerland, the Swiss National Bank. That’s the very same central bank that had quietly bailed out UBS during the financial crisis of 2008 with the assistance of dollar swap lines from the Federal Reserve (the “Fed”) – the central bank of the U.S. Yesterday, the Fed announced the return of those emergency dollar swap lines as the shotgun wedding of UBS and Credit Suisse failed to quell a spreading banking panic. The way this UBS bailout went down in 2008 was illuminated in the audit of the Fed’s emergency bailout facilities from December 2007 to July 2010 that was … Continue reading →

By Pam Martens and Russ Martens: March 15, 2023 ~ The “Related Articles” linked below (a tiny sampling of relevant articles) will remind our readers just how long and in how many different ways we have been attempting to warn that the U.S. banking system was incompetently structured and at risk of systemic contagion. We have also repeatedly warned that the crony, captured Fed was the worst possible banking supervisor and should be stripped of its bank regulatory powers and restricted to setting monetary policy. We have repeatedly cautioned, citing experts in the field, that the Fed’s stress tests were little more than a placebo and would not prevent the next banking crisis. (Check out our numerous articles at this link. Scroll down.) On July 29 of last year we wrote that Wall Street Megabanks’ Multi-Billion Dollar Blunders Suggest Money Controls as Good as George Bailey’s Uncle Billy and summed up … Continue reading →

By Pam Martens and Russ Martens: December 6, 2022 ~ U.S. Treasury Secretary Janet Yellen has the dual role of Chairing the Financial Stability Oversight Council (F-SOC), whose role is to provide “comprehensive monitoring of the stability of our nation’s financial system.” Heads of each of the federal agencies that supervise Wall Street and the mega banks sit in on meetings of F-SOC. One would think that such an august body would have a handle on “staggering” threats to the U.S. financial system – especially since F-SOC was created under the 2010 Dodd-Frank financial reform legislation to prevent a replay of the off-balance sheet derivatives that crashed the U.S. economy in 2008 and forced an unprecedented and secret bailout of U.S. and foreign global banks by the Federal Reserve to the tune of $29 trillion. If Yellen is aware of the latest threat to financial stability, she’s not sharing the details … Continue reading →

By Pam Martens and Russ Martens: October 19, 2022 ~ Today, we will be asking the Senate Banking Committee, its Chair, Senator Sherrod Brown, and one of its most knowledgeable members, Senator Elizabeth Warren, to call an emergency hearing and subpoena the testimony of two brilliant researchers for the Office of Financial Research. Those researchers are Andrew Ellul and Dasol Kim. The men have done nothing wrong. In fact, they have done something courageous. They have effectively blown the whistle on how global Wall Street banks have, once again, endangered the stability of the U.S. financial system through their opaque and dangerous use of over-the-counter derivatives. Unfortunately, because of the legions of lobbyists employed by Wall Street that shape and corrupt the rules of federal bank regulators, these men are prevented from revealing the names of the most dangerous banks and their most dangerous counterparties because that information is considered restricted … Continue reading →

By Pam Martens and Russ Martens: September 20, 2022 ~ There are eight Global Systemically Important Banks (G-SIBS) in the U.S. They are: JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, Bank of New York Mellon, Morgan Stanley, State Street and Wells Fargo. These are the banks that pose the greatest risk to the stability of the U.S. financial system and are monitored under the Federal Reserve’s stress tests. Five of those eight banks pose the greatest risk to financial stability because together they hold $200.18 trillion (yes trillion) in notional derivatives (face amount) or 86 percent of all derivatives held by all of the nation’s banks, according to the Office of the Comptroller of the Currency – the federal regulator of national banks. Those banks are: JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, and Bank of America. In any Senate Banking or House Financial Services Committee hearing that is going … Continue reading →

By Pam Martens and Russ Martens: June 13, 2022 ~ Welcome to Monday morning and market hell. As of 8:47 a.m. (ET) this morning, Dow futures are down 553 points; Bitcoin futures have lost 17 percent of their value on the news that cryptocurrency lender, Celsius Network, has frozen withdrawals. The 5-year Treasury note has spiked to yield 3.38 percent, a 50-basis point increase in a month, leading to an inverted yield curve against the 10-year Treasury note, which is trading at 9:01 a.m. (ET) this morning at a yield of 3.27 percent. (An inversion signals a rising recession risk.) All of this comes as the Fed has signaled that it will announce another interest rate hike this Wednesday, following the two-day meeting of its Federal Open Market Committee (FOMC). Stocks are developing a habit of tanking one day after Fed Chair Jerome Powell holds his FOMC Wednesday afternoon press conference, … Continue reading →