I have come to bury QT, not praise it.
Good morning.
“Today it looks all good.” - Sara Eisen
“The ultimate result of shielding men from the effects of folly, is to fill the world with fools.” - Henry Spencer
I am so confused:
Americans' Real Wages Drop For 32nd Straight Month
No amnesty for this:
About those falling yields…The inversion got worse.
US capitalism is ‘breaking down before our eyes’, says Ken Griffin
Citadel founder [and ward of the state] argues that refusing to bail out SVB depositors in full would be ‘great lesson in moral hazard’
Ya think? This is rich coming from one of the guys who so grotesquely rewarded financial war criminal Ben Bernanke, the psychopath who started all the ZIRP and QE nonsense that overwhelmingly benefited people like, well, Ken Griffin.
The template for the plan is the saving and loan crisis of the late 1980s, when just one federal agency, the now-defunct Office of Thrift Supervision (OTS) issued over 30,000 criminal referrals and over 1,000 major bank executives went to prison.
By comparison, in the 2008 financial crisis, OTS and their bank regulator counterparts made zero outside criminal referrals on financial crimes. And more recently, the rate of corporate prosecutions has been pathetic.
FDIC insured bank failures per year back in the day:
"Inside Ben Bernanke Inc.: The lucrative life of the former Fed chairman"
“Call it Bernanke Inc., a post-Fed one-man-show that’s worth millions annually on the open market."
Luncheon for the Honorable Ben S. Bernanke, March 11, 2008. Quite a Murderer's Row here of future bailout recipients, including Ben's future employer Ken Griffin, whom Bernanke was interning with at the time.
“When the stance of monetary policy is accommodative over an extended period, the likelihood of financial turmoil down the road increases considerably.”
Grant’s Interest Rate Observer Explains the New BTFD Program
…yesterday’s unveiling of the Bank Term Funding Program serves as a de facto reintroduction of the quantitative easing policy in force for large swaths of the post-2008 era, some believe. “The new BTFP facility is QE by another name,” strategists at Citi write. “Assets will grow on the Fed balance sheet, which will increase reserves. Although, technically, they are not buying securities, reserves will grow.”
That prospective return to balance sheet expansion is ironic, considering that the Fed’s policy stance in the latter stages of the pandemic arguably laid the groundwork for the current snafu. Recall that the morning of June 10, 2021 brought news that headline CPI vaulted by 5% year-over-year in May, well above the 4.7% consensus and accelerating from a 1.7% annual pace just three months earlier. That data point arrived a month after San Francisco Fed President Mary Daly declared that “it’s not yet time to start thinking about talking about relaxing the accommodation that we’ve given.”
Rather than pull back from the Covid-era policy pillars of near-zero interest rates and bountiful asset purchases, the Fed maintained the benchmark Funds rate at 0% to 0.25% while expanding Reserve Bank credit by $1.19 trillion over the subsequent nine months, despite the fact that measured price pressures increased in nearly every month during that stretch. Even following 12 months of QT balance sheet runoff, the Fed’s holdings of interest-bearing assets remain at $8.3 trillion, roughly $400 billion north of the June 2021 level.
Indeed, that belated response to percolating inflation (along with the euphoric financial conditions that prevailed in 2021), is prologue to today’s difficulties, a recent analysis from Daly’s institution finds. Last month, the San Francisco Fed published Working Paper 2023-06, titled “Loose Monetary Policy and Financial Stability,” which concludes that “when the stance of monetary policy is accommodative over an extended period, the likelihood of financial turmoil down the road increases considerably.” Though some might consider that finding to be logically intuitive, the authors contend otherwise: “This study provides the first evidence that the stance of monetary policy has implications for the stability of the financial system.” [As I noted in yesterday’s post, even the TV show South Park made this exact point in 2009]
What a world these econ clowns live in.
The Federal Reserve said Monday it is launching an internal review of its supervision and regulation of Silicon Valley Bank after its failure last week. The review, which will be led by Vice Chair for Supervision Michael Barr, will be publicly released by May 1, the Fed said. The collapse of the lender, which was overseen by the San Francisco Fed, was the biggest bank failure in more than a decade.
Keep in mind this is Michael Barr, not Bill or Donald Barr.
Barr backed up his boss Timothy Geithner at every turn, persistently seeking to weaken the bill. He publicly opposed tougher derivatives regulations, like forcing banks to spin off their trading desks. And former FDIC Chairwoman Sheila Bair writes in her book Bull By the Horns about Barr trying to water down provisions like the Volcker rule, and add loopholes that would allow for future bailouts of financial institutions.
Super.
Oooh! An internal review! Bernie Madoff should’ve just done an internal review!
I wonder if the Fed’s “Inspector General” is going to help in the internal probe…
The Federal Reserve Inspector General who cleared Jerome Powell and Richard Clarida of making improper financial trades is appointed by the Fed Board of Governors; reports to the same Board of Governors; and can be fired by them.
Oh, and maybe San Fran Fed President Mary Daly should’ve been regulating banks instead of spouting moronic nonsense:
How HSBC bought Silicon Valley Bank UK for £1 (It seems like just yesterday that HSBC was laundering money for Mexico’s Sinaloa drug cartel and Colombia’s Norte del Valle cartel.)
“To reiterate: HSBC laundered money for guys who chop peoples' heads off with chainsaws. So we can dispense with the "but no one broke any laws" thing.”
- Matt Taibbi (Taibbi was the best best chronicler of the bubbles before this one)
Geithner remained close to Summers, whom he used to play elaborate practical jokes on. More than once, when Summers was out giving a speech, Geithner would rewrite the wire news article about the presentation, purposely misquoting him. When Summers would return to the Treasury building after his speech, Geithner would present Summers with the doctored news report as if it were the real thing, and then just watch Summers blow up, threatening to call the reporter and demand a correction until Geithner let him in on the joke. The two men became so close that for years they, and other Treasury colleagues, went to a tennis academy in Florida run by Nick Bollettieri, who coached Andre Agassi and Boris Becker. Geithner, with his six-pack abs, had a game that matched his policy-making prowess. “Tim’s controlled, consistent, with very good ground strokes,” Lee Sachs, a former Treasury official, said.
The above passage is from Sorkin’s fan-fiction novel, “Too Big To Fail.”
So tell me more about Fed Credibility?
“An economic architecture built around artificially low cost of capital which over-stimulated segments of the economy and encouraged leverage and speculation, on a large scale, was neither sustainable nor costless.”
Fannie Mae approves six vendors for controversial new valuation initiative
Just when I think the idiots running California can’t get any stupider…
Tobias Carlisle, Porter Collins, Vincent Daniel and Jake Taylor (recorded before the recent unpleasantness)
Demetri Kofinas speaks with Steven Kelly about the government’s decision to bail out depositors at Silicon Valley Bank I’ll note that Steven Kelly ironically comes from the Yale Program on Financial Stability, ‘founded’ by financial war criminal Tim Geithner.
Twitter bans:
In the vast majority of cases there was no trial, no report of the arrest. People simply disappeared, always during the night. Your name was removed from the registers, every record of everything you had ever done was wiped out, your one-time existence was denied and then forgotten. You were abolished, annihilated: VAPORIZED was the usual word.
- George Orwell, 1984
It just came out of anger, and frustration. It goes like this
Just wanted to say "Hi" Rudy. Keep the crash helmet and snacks handy. You know I can't see any evidence this iteration of human folly is getting impeded. So aside from what good I can do for anyone, I look on in amazement. My current pinned tweet is:
"The nature of evil is horrid, but once understood and accepted, it can be countered by good values and a strategy of defense and confrontation. The nature of how so many humans could, but don't effectively react until it's too late, induces dissonance that can't ever be overcome."
I'll tweet a link and remind people you're here.
This is top shelf material. Appreciate it.