Search Results for: Federal Reserve

By Pam Martens and Russ Martens: June 26, 2020 ~ Yesterday the Federal Reserve released its highly awaited stress tests on the biggest and most dangerous banks in America. The stress test results fill an 83-page document with dozens of charts showing what would happen to the banks under a hypothetical “severely adverse scenario.” This scenario, unfortunately, was previously prepared and pales in comparison to the actual economic damage rendered by the COVID-19 pandemic. For example, the severely adverse scenario for this year’s stress tests imagined the U.S. unemployment rate climbing to a peak of 10 percent in the third quarter of 2021. The unemployment rate is currently 13.3 percent. But far more frightening, the Fed’s severely adverse scenario for GDP imagined a decline of “8½ percent from its pre-recession peak, reaching a trough in the third quarter of 2021.” As of yesterday, June 25, the Atlanta Fed’s GDPNow estimate … Continue reading →

By Pam Martens and Russ Martens: June 25, 2020 ~ The Federal Reserve will release the results of its stress tests on the biggest and most dangerous banks at 4:30 p.m. today. But the potential results of those tests played a negative role in the stock market’s performance yesterday. The Dow’s drop of 710 points yesterday can be ascribed to two things: the alarming news reports that COVID-19 cases are skyrocketing in the second and third most populous states in the U.S. – Texas and Florida; and a bombshell report from Bloomberg News released at 7:00 a.m. yesterday morning. The Bloomberg article, by Lisa Lee and Shahien Nasiripour, cast the Federal Reserve in an unfavorable light over its failure to halt dividend payments at the biggest Wall Street banks, something that European bank regulators have done during the pandemic crisis. Eight of the largest U.S. banks announced in unison on Sunday, … Continue reading →

By Pam Martens and Russ Martens: June 22, 2020 ~ President Donald Trump has been sacking federal watchdogs at the speed of a bullet train. In just a six-week period in April and May, the President fired five Inspectors General of federal agencies. In last Friday night’s coup d’état, Attorney General William Barr, acting as consigliere for the President, ousted the U.S. Attorney for the Southern District of New York, the federal prosecutor that oversees prosecutions of Wall Street banks in that district. The privately owned Federal Reserve Bank of New York, which is in charge of the bulk of the Fed’s bailout programs, also resides in that district. Barr and the President want to put a man with zero experience as a prosecutor in charge of that office, Jay Clayton, who currently heads the Securities and Exchange Commission which has only civil enforcement powers. Clayton represented 8 of the … Continue reading →

By Pam Martens and Russ Martens: June 18, 2020 ~ As corporate-friendly Republican members of the Senate Banking Committee and House Financial Services Committee engaged in effusive praise at hearings this week over the efforts of Fed Chairman Jerome Powell to quickly establish a plethora of corporate bailout facilities, the voices of Wall Street veterans have struck a different chord. These long-term market watchers are warning that the Fed has created an unprecedented stock market bubble that is destined to end badly. Earlier this week, CNBC anchor Melissa Lee interviewed Sven Henrich, the Lead Market Strategist at Northman Trader. Henrich savaged the Fed’s recent interventions in the market, stating the following: “The Fed really has created a massive asset bubble here in the last few months. The lender of last resort has become the lender of the entire resort. And no red line shall remain uncrossed. “The Fed has basically … Continue reading →

By Pam Martens and Russ Martens: June 18, 2020 ~ There is fresh evidence that Citigroup, the mega Wall Street bank that was insolvent but still illegally propped up by the Fed during the last financial crisis (to the tune of $2.5 trillion cumulatively in secret loans for two and one-half years) is back to drinking at the Fed’s trough. The Fed has set up a program called the Paycheck Protection Program Liquidity Facility (PPPLF). That Fed program is reimbursing small banks for the small business loans that they made under the Paycheck Protection Program which was established by Congress in the CARES Act and being overseen by the Small Business Administration (SBA). According to the Fed, the idea is to reimburse these banks around the country for the PPP loans so that they can make fresh loans to other struggling consumers and businesses. The banks simply post the PPP … Continue reading →

By Pam Martens and Russ Martens: June 17, 2020 ~ The Paycheck Protection Program (PPP) was authorized by Congress under the CARES Act and is being overseen by the Small Business Administration (SBA). The goal of the PPP program is to make 1 percent interest loans to small businesses experiencing hardship from the coronavirus crisis and then forgive the loans if the businesses keep their employees on the payroll. Even though the loans are guaranteed against losses by the SBA, the Federal Reserve launched its own program, called the Paycheck Protection Program Liquidity Facility, to reimburse lenders who make these loans. So far, the Fed has reimbursed $57 billion of these loans as of June 10, out of total loans approved by the SBA of more than $500 billion. The odd thing about those Fed reimbursements is that a stunning $5.3 billion in reimbursements, or 9 percent of the $57 … Continue reading →

By Pam Martens and Russ Martens: June 16, 2020 ~ Taxpayers’ money is being used to make the Paycheck Protection Program (PPP) loans. Thus, the public has every right to know the names of the recipients of those loans. Despite originally promising transparency, U.S. Treasury Secretary Steve Mnuchin is now stonewalling Congress on releasing a list of the recipients. Congress sold the plan to the public on the basis that the loans would go to small businesses with less than 500 employees. The funds were to be predominantly used to keep workers employed and allow the businesses to survive the coronavirus shutdowns. Instead, our search of filings at the Securities and Exchange Commission reveals that dozens of debt zombie companies that trade on Nasdaq got the loans. Dozens of publicly-traded companies with large credit lines from banks got the loans. Dozens of companies with a lot more than 500 employees … Continue reading →

By Pam Martens and Russ Martens: June 12, 2020 ~ Every major Wall Street bank tanked yesterday. Citigroup fared the worst, losing 13.37 percent of its market value versus a broader market decline of 5.89 percent on the S&P 500 Index. Bank of America didn’t look like much of a source of strength either, losing 10.04 percent on the day. The largest bank in the country, JPMorgan Chase, whose CEO, Jamie Dimon, perpetually brags about its “fortress balance sheet,” lost 8.34 percent. For a close look at what’s hiding in the tall weeds behind that fortress, see here. Just the afternoon before this bank carnage, this is what the Chairman of the Federal Reserve, Jerome Powell, had to say in his press conference about the U.S. banking system (which, of course, the Fed has been in charge of supervising in order to prevent another catastrophic blowup as occurred in 2008): … Continue reading →

By Pam Martens and Russ Martens: June 11, 2020 ~ Federal Reserve Chairman Jerome Powell’s press conferences are typically snooze sessions. Yesterday’s virtual press conference got off to a similar start with mainstream media reporters asking about inflation and monetary policy instead of the more critical questions they should have been asking in the midst of the worst labor market and business closures since the Great Depression and food pantry lines that stretch for blocks. Fortunately, two reporters shook things up at the very end of the press conference. Nancy Marshall-Genzer of Marketplace, which airs on public media stations, bluntly asked Powell this: “Is there more the Fed could do to deal with inequality, for example, use the Black unemployment rate as a benchmark.” Powell’s answer was an abomination. First Powell stated that inequality is not related to monetary policy. Next, he decided to target a more specific villain – … Continue reading →

By Pam Martens and Russ Martens: June 10, 2020 ~ The Federal Reserve has authorized 11 financial bailout programs thus far. Despite Fed Chairman Jerome Powell’s reassurances at his press conferences that these programs are to help American families, a full 10 of these programs are actually bailouts of Wall Street banks or their trading units. The latest Wall Street bank bailout to come out of hiding is the Fed’s Secondary Market Corporate Credit Facility (SMCCF). This program was supposed to buy up corporate bonds in the secondary market in order to help corporate bond markets regain liquidity. Thus far, the only thing the SMCCF has bought up are Exchange Traded Funds (ETFs) holding investment grade and junk-rated bonds. The SMCCF program began operations on May 12. By May 18 the Fed had spent $1.58 billion buying up ETFs. The ultimate goal of the facility, at this point, is to … Continue reading →