Search Results for: Federal Reserve

By Pam Martens and Russ Martens: March 23, 2021 ~ Yesterday the Federal Reserve released its “audited” financial statements with the following caveat, among numerous others: “Due to the unique nature of the Reserve Banks’ powers and responsibilities as part of the nation’s central bank and given the System’s unique responsibility to conduct monetary policy, the Board has adopted accounting principles and practices in the FAM [Financial Accounting Manual for Federal Reserve Banks] that differ from accounting principles generally accepted in the United States of America (GAAP).” The Federal Reserve is the regulator of the largest bank holding companies in the United States and, since December of 2007, has been shoveling trillions of dollars at the trading houses owned by these bank holding companies almost on a non-stop basis, if you include Quantitative Easing (QE) programs 1, 2, 3 and 4 and the repo loan bailout that began on September 17, … Continue reading →

By Pam Martens and Russ Martens: March 19, 2021 ~ During the Wednesday House Financial Services Committee hearing on the toxic business model gaining steam on Wall Street, where market makers pay for order flow from online brokerage firms like Robinhood in order to trade against the so-called “dumb money” from retail investors, there were regular bursts of hypocrisy from the Wall Street-funded Republicans on the Committee. One of the most gag-worthy lectures came from Congressman Andy Barr (R-KY). According to the Center for Responsive Politics, nine of Barr’s top 15 donors to his Campaign Committee and Leadership PAC for the 2019-2020 campaign cycle are connected to Wall Street. Those donors include Prudential Financial (which is a derivatives counterparty to mega banks on Wall Street); Apollo Global Management, a private equity firm; Bank of America, parent of the giant brokerage firm Merrill Lynch; Charles Schwab, the retail brokerage firm; FMR Corp., … Continue reading →

By Pam Martens and Russ Martens: March 17, 2021 ~ Most Americans are unaware of the existence of the Exchange Stabilization Fund (ESF). Together with the Federal Reserve Bank of New York (New York Fed) it has morphed into the U.S. Treasury Secretary’s Plunge Protection Team. The ESF was created in 1934 to provide support to the U.S. dollar during the Great Depression. As recently as March 31, 2007, the ESF was fairly modest in size, with assets of just $45.9 billion. Prior to Trump taking office, it had grown to $94.3 billion in assets. But thanks to a fancy maneuver by President Donald Trump’s Treasury Secretary, Steve Mnuchin, the ESF skyrocketed to a staggering balance of $682 billion as of September 30, 2020. Mnuchin was able to give himself this massive slush fund by helping to write the 2020 stimulus bill known as the CARES Act, which handed him $500 … Continue reading →

By Pam Martens and Russ Martens: March 16, 2021 ~ Less than five months ago, Goldman Sachs and its Malaysian subsidiary were criminally charged by the U.S. Department of Justice “for a sweeping international corruption scheme, conspiring to avail itself of more than $1.6 billion in bribes to multiple high-level government officials across several countries so that the company could reap hundreds of millions of dollars in fees.” The case has become infamously known as the 1MDB scandal, named after the Malaysian sovereign wealth fund that was ripped off. Goldman Sachs admitted to the charges and paid a criminal penalty and disgorgement of over $2.9 billion to settle the charges with the Department of Justice. That sum was on top of the $2.5 billion in cash it paid to settle with the government of Malaysia. Stripping shareholders of $5.4 billion of their capital for criminal conduct in the midst of the worst … Continue reading →

By Pam Martens and Russ Martens: March 10, 2021 ~ Yesterday’s Senate Banking Committee hearing to assess if the wild trading in meme stocks like GameStop and others requires new regulations on Wall Street turned into an overall assessment that Wall Street’s capital allocation system is broken and the main function of Wall Street today is a wealth transfer system for the rich. The Chair of the Committee, Senator Sherrod Brown (D-OH) summed it up as follows: (Read his full, enlightening remarks here.) “We’ve seen Wall Street treat the markets as a game for decades – a game they always win, at the expense of pretty much everyone else. Wall Street has never been friendly to the little guy. Surely this time is no different. Yes, some regular people have had success. But fundamentally, the system is set up to funnel more wealth to the already-wealthy. Just like in Las Vegas, … Continue reading →

By Pam Martens and Russ Martens: March 4, 2021 ~ Pull up a chair and get comfy. You’re about to watch the first act in what is likely to be a long-running show called “The Great Tech Wreck of Zero-Dividend Stocks.” The show’s sponsor is rising yields on U.S. Treasury notes which make tech stocks that have ballooned in price (as the Fed held interest rates artificially low) and pay no cash dividends to compete with the rising yields, particularly unattractive. As the chart above indicates, yields on the 5-year and 10-year U.S. Treasury Notes have been rising sharply since early August, with the yield more than tripling on both. The 10-year Note has moved from 0.50 percent since early August to 1.46 percent early this morning. In the same span of time, the yield on the 5-year note has spiked from 0.20 percent to 0.72 percent. The upward surge in yields … Continue reading →

By Pam Martens and Russ Martens: March 3, 2021 ~ The new, 34-year old Democratic Senator from Georgia, Jon Ossoff, let a very big cat out of the bag at yesterday’s Senate Banking hearing. For at least a year, from September 17, 2019 through at least September 30, 2020, the New York Fed, acting as an agent for the Federal Reserve, doled out a cumulative $9 trillion or more in repo loans. The Fed would say only that the money was going to some of its 24 Primary Dealers on Wall Street, without naming any specific bank receiving the money. In June of 2020, the New York Fed abruptly stopped reporting the dollar amounts it was pumping out each day. (See Watchdog Report: Fed’s Billions in Emergency Repo Loans to Wall Street Didn’t Go Away in June; They Just Went Dark.) The emergency repo loans by the Fed began months before there … Continue reading →

By Pam Martens and Russ Martens: March 1, 2021 ~ Beginning on September 17, 2019 – months before there was any report of a COVID-19 case anywhere in the world – the Federal Reserve turned on its money spigot to the trading houses on Wall Street. By October 23, 2019 the Fed announced that it was upping these loans to $690 billion a week – again, months before any report of COVID-19 anywhere in the world. Earlier in October 2019, the Fed had also announced that it would be buying back $60 billion a month in Treasury bills. Within a span of six months, the Fed had pumped out a cumulative $9 trillion in loans to Wall Street’s trading houses, according to its own spread sheets, with no peep as to which Wall Street firms were getting the bulk of that money. It’s more than a year later and the … Continue reading →

By Pam Martens and Russ Martens: February 26, 2021 ~ The action in the U.S. Treasury market yesterday reminded us of the classic “I Love Lucy” episode at the chocolate factory. As the conveyor belt churns out chocolate balls faster than Lucy and Ethel can handle them, they resort to stuffing them in their mouths, their hats, and their shirts. Lucy remarks: “I think we’re fighting a losing game.” (See video clip below.) That was the scene in the Treasury market yesterday – too much supply and no where to stuff it, causing a sharp spike in yields which set off a stock market selloff that left the Dow down 559.8 points or 1.75 percent on the day, while the tech-heavy Nasdaq fared far worse, losing 478.5 points or 3.52 percent. That the Treasury market is now projectile vomiting T-notes should come as a surprise to no one. As the … Continue reading →

By Pam Martens and Russ Martens: February 24, 2021 ~ Every Thursday, at approximately 4:30 p.m., the Federal Reserve provides a report on its balance sheet as of the prior day. It’s known as the H.4.1 report or the Wednesday Level report. On Thursday, September 4, 2008, the Fed’s H.4.1 report showed a $935 billion balance sheet as of Wednesday, September 3, 2008. That was 12 days before iconic financial institutions on Wall Street began to blow up in what became the worst financial crisis since the Great Depression. As of last Wednesday, February 17, 2021, the Fed’s balance sheet stood at $7.6 trillion – an increase of 712.83 percent in less than 13 years. The Federal Reserve was created in 1913 and such a staggering growth in its balance sheet has not occurred at any other period in U.S. history — not during the Great Depression, not even during … Continue reading →