By Pam Martens and Russ Martens: April 6, 2021 ~ The short version on what the collapse of the Archegos Capital Management hedge fund signifies is that it was one more in a long series of Wall Street’s maniacal wealth extraction schemes for the one percent that blew up in its face. Let’s start with press reports that major Wall Street firms were making 85 percent margin loans to purchase stocks against 15 percent cash collateral put up by Archegos. The Federal Reserve’s Regulation T (Reg T) is codified in 12 CFR § 220.12 and spells out margin requirements on stock trades as follows: “50 percent of the current market value of the security or the percentage set by the regulatory authority where the trade occurs, whichever is greater.” Under the seeming law of the land, broker dealers on Wall Street could not have loaned Archegos more than 50 percent to make its … Continue reading →

“This raises the serious question as to whether the Senate Banking and House Financial Services Committees should be investigating the gamification of markets or the monetization of the stock market via Wall Street’s ownership of federally insured deposits.” By Pam Martens and Russ Martens: April 5, 2021 ~ In late March, the Office of the Comptroller of the Currency (OCC) released its quarterly report on “Bank Trading and Derivatives Activities.” Graph 15 of the report shows that using data submitted by banks on their form RC-R of their call reports, JPMorgan Chase’s federally insured bank had exposure to $2.65 trillion in notional equity (stock) derivatives as of December 31, 2020. (Notional means face amount.) That’s a stunning figure for the largest federally-insured bank in the United States to have in exposure to the stock market. But more stunning is the fact that according to the OCC, JPMorgan Chase’s equity derivative contracts … Continue reading →

By Pam Martens and Russ Martens: April 1, 2021 ~ We rarely make predictions but we’re going to make one with confidence today. The New York Stock Exchange’s efforts to capture more market share of the IPO business by listing highly questionable Chinese companies and blank-check companies (SPACs) with no prior business history is going to inevitably blow up and cause long-term reputational damage to an institution that is indelibly linked to U.S. markets. Despite U.S. markets now showing all the earmarks of unbridled corruption fueled by insatiable greed, anti-regulatory Republicans in Congress are still calling U.S. markets “the envy of the world” and demanding a hands-off approach. Rather than actually being “the envy of the world,” the rest of the planet actually remembers that it was inadequately regulated U.S. markets that blew up the global economy in 2008. RLX Technology, an IPO (Initial Public Offering) that had its debut on … Continue reading →

By Pam Martens and Russ Martens: March 31, 2021 ~ On March 9 Morgan Stanley announced that it had been “recognized for industry-leading risk management technology.”  Three weeks later it has landed in the middle of one of the biggest hedge fund blowups since the financial crisis of 2008, raising serious questions about how it manages risk. Adding to the embarrassment for both Morgan Stanley and its bank holding company supervisor, the Federal Reserve, the Chairman and CEO of Morgan Stanley, James Gorman, sits on the Board of Directors of the New York Fed, to whom the Fed has outsourced much of its oversight of the Wall Street banks. A look at Morgan Stanley’s $647 billion in stock portfolio holdings that it filed with the Securities and Exchange Commission for the quarter ending December 31, 2020 explains why Morgan Stanley has been so strangely silent as the Archegos scandal has played … Continue reading →

By Pam Martens and Russ Martens: March 30, 2021 ~ The Archegos Capital Management hedge fund implosion has, thus far, delivered billions of dollars in losses to the shareholders of global banks Credit Suisse and Nomura, whose market values have plummeted; done serious reputational damage to Goldman Sachs and Morgan Stanley, both of whom are allowed to own federally-insured banks even after they came close to blowing themselves up in 2008 and surely would have without gargantuan secret bailouts from the Federal Reserve; cut the market value of ViacomCBS in half; dropped the market value of Discovery by 40 percent; shaved billions of dollars off the market value of major Wall Street banks yesterday as rumors ran wild about who is hiding losses; and raised critical questions, once again, about the competency of the Federal Reserve to supervise these federally-insured trading casinos. The Archegos meltdown has done one more thing. It … Continue reading →

By Pam Martens and Russ Martens: March 29, 2021 ~ It was a bone-chilling 42 degrees with winds gusting to 28 miles per hour when Joe Biden was sworn in as the 46th President of the United States on January 20. Today is Biden’s 69th day in office. Washington D.C.’s beloved Cherry Blossoms are within days of reaching their peak, and yet, Biden’s nominee to Chair the Securities and Exchange Commission, Gary Gensler, has not been confirmed by a full vote in the Senate. Given that former President Trump’s SEC Chair, Jay Clayton, has left U.S. markets in their most perilous state since 1929, one would think that the Senate would be rushing to hold a vote to confirm Gensler. (Clayton had legally represented 8 of the 10 largest Wall Street banks in the three years before Trump nominated him to become SEC Chair. Clayton left the SEC after a controversial … Continue reading →

By Pam Martens and Russ Martens: March 26, 2021 ~ If the Securities and Exchange Commission is not taking a hard look at the involvement of Dark Pools owned by the biggest banks on Wall Street during the meteoric spike in the price of GameStop shares in late January, then we have to conclude that it doesn’t want to actually get at the truth. Wall Street On Parade spent one hour combing through the Dark Pool trading data available through Wall Street’s self-regulator, FINRA, and the evidence of Dark Pools’ involvement in the dodgy trading in GameStop is striking. (GameStop is a New York Stock Exchange listed company and it has been trading like a penny stock operated out of a boiler room – raising questions about the integrity of U.S. markets.) FINRA only provides Dark Pool data lumped together for an entire week, instead of on a daily basis. But … Continue reading →

By Pam Martens and Russ Martens: March 25, 2021 ~ Yesterday, during a Senate Banking hearing with witnesses Fed Chair Jerome Powell and Treasury Secretary Janet Yellen, Senator Elizabeth Warren grilled Yellen on why BlackRock wasn’t being investigated for posing a systemic risk to the U.S. financial system. Warren stated: “BlackRock is the world’s largest asset management firm, overseeing nearly $9 trillion in assets. That’s more than double where it was 10 years ago. It also holds a stake in just about every company listed on the S&P 500. To put that in perspective, Blackrock manages more assets than the entire GDP of Japan, or Germany, or Great Britain or any other nation in the world, except the United States and China.” BlackRock may, indeed, pose a systemic risk to the U.S. financial system but it’s not because it holds a stake in just about every company listed on the S&P … Continue reading →

By Pam Martens and Russ Martens: March 24, 2021 ~ There’s a full-blown assault occurring right now to lure young, unsophisticated investors to trade their own accounts instead of investing in low-cost passive index funds or using an investment advisor. The enticements are the worst we have ever seen and harken back to what was occurring in the lead up to the devastating 1929 stock market crash that ushered in the Great Depression. Consider the video advertisement shown below from stock and options trading app, Gatsby, owned by Gatsby Digital, Inc. A young black man sits unshaven in his bathrobe tapping on his mobile phone, ostensibly getting stock quotes or placing trades. A voice-over reassures him: “Of course you’re ready. You were born ready. And with Gatsby, it’s so easy. You can do it from anywhere.” Fade to the man in the bathrobe sitting on a toilet seat, ostensibly still trading … Continue reading →

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 →