Fed Ups Its Wall Street Bailout to $690 Billion a Week as Media Snoozes

[Hydrogen]

By Pam Martens and Russ Martens: October 24, 2019 ~

Yesterday the Federal Reserve Bank of New York (New York Fed) announced that the giant money spigot it turned on for Wall Street on September 17 would be growing exponentially beginning today.

The New York Fed will now be lavishing up to $120 billion a day in cheap overnight loans to Wall Street securities trading firms, a daily increase of $45 billion from its previously announced $75 billion a day. In addition, it is increasing its 14-day term loans to Wall Street, a program which also came out of the blue in September, to $45 billion. Those term loans since September have been occurring twice a week, meaning another $90 billion a week will be offered, bringing the total weekly offering to an astounding $690 billion. It should be noted that if the same Wall Street firms are getting these loans continuously rolled over, they are effectively permanent loans. (That’s exactly what happened during the 2007-2010 Wall Street collapse: some teetering Wall Street casinos received, individually, $2 trillion in cumulative loans that were rolled over for two and one-half years – without the authorization or even awareness of Congress or the American people. One bank, Citigroup, received over $2.5 trillion in Fed loans, much of them at an interest rate below 1 percent, at a time when it was insolvent and couldn’t have obtained loans in the open market at even high double-digit interest rates.)

This latest announcement from the Fed comes on the heels of an October 11 announcement that it is launching a program to buy up $60 billion a month in Treasury bills and that program will last into “at least” the second quarter of next year.

What the New York Fed is doing is unprecedented in U.S. history and yet you will find no mention of it on any front page of a newspaper today. This is just a partial list of what makes this action unprecedented or highly questionable:

No Wall Street crisis has been announced to the public to explain these massive loans and Treasury buybacks;

Not one hearing has been held by Congress on the matter;

Not one official elected by the American people has authorized these loans;

The loans are not being made to commercial banks (which could re-loan the money to stimulate the U.S. economy). The loans are going to the New York Fed’s primary dealers, which are stock and bond trading houses on Wall Street who count hedge funds among their largest borrowers; (See list below. There is only one bank among the 24 primary dealers.)

Many of the primary dealers are units of foreign banks whose share prices have been in freefall. The Fed is making these loans at approximately 2 percent interest – an interest rate these firms could not come anywhere close to obtaining in the open market;

These same foreign banks are counterparties to mega U.S. banks’ derivative trades – raising the suggestion that this is another bailout of Wall Street’s derivatives mess as occurred in 2008;

The Dodd-Frank financial reform legislation of 2010 was supposed to rein in this exact type of abuse by the New York Fed and, in fact, it states that Congress must be informed as to which banks are receiving the money to be sure it’s not going, once again, to failing financial institutions as happened in the last crisis;

The Government Accountability Office (GAO), when it released its audit of the Fed’s bailout programs of 2007 to 2010 chastised the Fed for failing to document the reasons it was flinging trillions of dollars to Wall Street and foreign banks. Notwithstanding the GAO’s report, the New York Fed is back to its old tricks again;

The New York Fed is owned by its members banks in its region. Representatives of these banks sit on its Board of Directors. It is thus too conflicted to be in charge of this bailout money spigot which is ultimately backstopped by the U.S. taxpayer if the New York Fed fails;

The New York Fed is the regulator of the largest bank holding companies in the U.S. But its failure as a regulator is why these same banks needed to be massively bailed out in 2008 and, apparently, again now. This system lacks any semblance of checks and balances;

The parent organizations of five of its primary dealers have admitted to criminal felony counts brought by the U.S. Department of Justice for frauds against the investing public. Bailing out felons and Wall Street firms with serial histories of wrongdoing perpetuates moral hazard and, thus, more wrongdoing and bailouts.

Just this morning the New York Fed pumped out $134.15 billion to Wall Street under its new loan programs. The $45 billion in 14-day loans was oversubscribed by $17.15 billion, meaning the demand for liquidity on Wall Street is growing, not subsiding. Congress and mainstream media failed to do their job in the leadup to the epic Wall Street crisis of 2008 and they are failing the American people again.

https://wallstreetonparade.com/2019/10/fed-ups-its-wall-street-bailout-to-690-billion-a-week-as-media-snoozes/

....



Witnessing US stock markets recent gains, some might feel tempted to sell off their crypto holdings and buy stocks instead, under the expectation traditional equities investments are more regulated, safe and stable in contrast to cryptocurrencies. I hope anyone with those feelings reads the above article. It could shift their perspective on things.

The recent uptick in US stocks could represent market manipulation on the part of federal reserve, bailing out banks and wallstreet who are then throwing bailout capital at stocks to artificially inflate market value.

If Satoshi were alive and active today, I think he might take interest in the dealings of financial regulators and central banks who are continuing to adopt many identical practices today, which initially led to the economic crisis of 2008.

[alyssa85]

This is not really a "bailout". It's overnight lending of collateralised loans. So the borrower gives the Fed it's treasuries as collateral, the Fed lends them cash overnight, at the overnight interest rate. The borrower repays the capital and interest the next day and the Fed gives back the collateral.

The only reason they're doing overnight lending is because the major banks have to hold extra cash in their reserves and can't lend it out like they used to.

I don't think 24-hour loans constitute a bailout in anyone's language. A bailout is when tax money is given in return for worthless shares, and there is no repayment.

[Pearls Before Swine]

Witnessing US stock markets recent gains, some might feel tempted to sell off their crypto holdings and buy stocks instead, under the expectation traditional equities investments are more regulated, safe and stable in contrast to cryptocurrencies.

Hell no, I won't be selling crypto to buy stocks.  The stock market is due for a crash, overdue in fact, and stock prices couldn't get much higher right now.  

These loans, tho...this isn't anything new, and even if they seem like very large amounts, banks are in measurably better shape than they were after the 2008 debacle.  The ones in the states have all been stress tested, and the loans aren't bailout money by any means.  That's just how the financial system operates and always has.

I don't think 24-hour loans constitute a bailout in anyone's language.

No, these loans are typical and aren't newsworthy, nor are they an attempt to bail any of the banks out.

[avikz]

As my fellow bitcointalk member alyssa85 pointed out correctly,  it's not a bailout scheme! It's a simple short term loan given out to the companies with temporary liquidity crunch! Whatever money FED will give out to these companies, will receive more in return! That's very normal in any mainstream economy! What shocking in this entire news is, the amount of money is being lent out and the amount of over subscription! These is a small sign of looming economic crisis!

[Wexnident]

Why would you drop crypto to run off to stocks, when in the past, you dropped stocks to run to crypto? You'd be killing yourself at that point if you will ever do that. I'm not all entirely sure about how to read this announcement of Fed, but I'm more entitled to believing that they need to somehow let the people's attention back onto the stocks somehow while addressing problems they've had in the past. I'm not entirely sure of the situation of stocks, but that's how I see this recent announcement.

[Hydrogen]

This is not really a "bailout". It's overnight lending of collateralised loans.

AFAIK these loans are virtually identical to bailouts to troubled banks post 2008 under the TARP bill.

The bailouts never truly ended. They simply became normalized to a point where people believed they were standard policy.

banks are in measurably better shape than they were after the 2008 debacle.  

Interesting. If you're looking for a counterpoint. Bloomberg published an article claiming more than 50% of the world's banks may be too weak to survive a recession, last month. I made a thread about it here:

https://bitcointalk.org/index.php?topic=5195846.msg52871571#msg52871571

One might say, part of the reason Satoshi invented bitcoin was due to the realization that none of the real issues in the banking industry which led to the 2008 crisis had ever truly been addressed, much less fixed. That's my take on it, anyway.

[cosmofly]

Witnessing US stock markets recent gains, some might feel tempted to sell off their crypto holdings and buy stocks instead, under the expectation traditional equities investments are more regulated, safe and stable in contrast to cryptocurrencies. I hope anyone with those feelings reads the above article. It could shift their perspective on things.

The recent uptick in US stocks could represent market manipulation on the part of federal reserve, bailing out banks and wallstreet who are then throwing bailout capital at stocks to artificially inflate market value.

If Satoshi were alive and active today, I think he might take interest in the dealings of financial regulators and central banks who are continuing to adopt many identical practices today, which initially led to the economic crisis of 2008.

I think this is not manipulation, it is the protection of their country and the protection of foreign investors.
they do so to strengthen the confidence of foreign investors and do not want US stocks plummet, which will be a loss to China.
This is a necessary action and nothing is wrong when it is a debt, not a free deposit.

[Hydrogen]

I think this is not manipulation

If crypto whales bought $1 billion in bitcoin to stabilize or boost prices, the media would label it market manipulation. You can see them do it all the time. They claim tether being used to buy bitcoin is "market manipulation" and that the 2017 run up of bitcoin was "market manipulation" by a single anonymous, unnamed, bitcoin whale.

The federal reserve loans $120 billion dollars a day to banks. Essentially the same thing that tether and bitcoin whales are accused of doing under market manipulation by the media. But somehow its not market manipulation?

Its interesting how financial terminology is prone towards being a double standard.

[Broly46]

The short term daily loan bailout in my opinion only carries one outcome, the bigger the value the stronger the market crash and the stronger the financial woes it would dealt to a investor, and the happier the bank get because they get bigger bonus from gullible trader who loss the bigger money by trading the delusional gambling market which is backed up scam businesses.

[Kakmakr]

This is not really a "bailout". It's overnight lending of collateralised loans. So the borrower gives the Fed it's treasuries as collateral, the Fed lends them cash overnight, at the overnight interest rate. The borrower repays the capital and interest the next day and the Fed gives back the collateral.

The only reason they're doing overnight lending is because the major banks have to hold extra cash in their reserves and can't lend it out like they used to.

I don't think 24-hour loans constitute a bailout in anyone's language. A bailout is when tax money is given in return for worthless shares, and there is no repayment.

This might not be defined as a "Bailout" but it just shows you how certain sectors of the financial world are given support by the government to stay afloat.    What would have happened if they did not give that collateral?

Bitcoin is not getting any support from the government and as a matter of fact, it is being sabotaged by the government to favor these financial entities that are on the brink of collapse.

All of this is just smoke and mirrors to fool the public <tax payer> into believing that the financial crisis is under control. The Titanic is sinking and we have government boats trying to keep it afloat.  

[Mometaskers]

Despite my limited understanding I share the cautiousness of people here. This is giving the impression that they are propping them up. If you want to cashout some of your crypto for stocks then that's fine but keep the amount you intend for crashes. Never forget what BTC was originally created for.

I think this is not manipulation

The federal reserve loans $120 billion dollars a day to banks. Essentially the same thing that tether and bitcoin whales are accused of doing under market manipulation by the media. But somehow its not market manipulation?

Its interesting how financial terminology is prone towards being a double standard.

Just as OPEC is "not" a cartel, it's not manipulation if it's the government doing it.

[el kaka22]

Considering it is just a loan I think it is fine. Daily loans have always been a thing in wall streets life, if you stop giving them that in the end you will see a crumbling wall street.

Now, I would LOVE to see a crumbling wall street, whatever the bad horrible economical outcome of that would happen, I am sure if we could just reset once and whatever bad comes with that reset if we could have higher and harder regulations to keep it ever happening again we would lie a horrible one generation at most but everyone else would live a great one.

However, if we are not letting them crumble that means there is nothing bad going on with the extra loans, sure it is riskier and one day maybe they will not be capable of paying it back and the whole economy goes belly up but as long as system is like this, that's gonna happen time to time.

[Febo]

Witnessing US stock markets recent gains, some might feel tempted to sell off their crypto holdings and buy stocks instead, ...

Does not that worry's you to buy on top?  Would not be better buy in 2009 when market crashed? Or you would sell back then and buy back now few times less?  Why you think Buffet is full of cash? He is ready to use it as soon crash will happen. His problem was only he sold to early.

[bitsurfer2014]

This is quite an alarming development on Wall St. as I sense a grand conspiracy to cover up what could be an impending crisis among financial institutions where the collapse of just one major entity could trigger a ripple effect that could lead into a major financial crisis!

In the first place, the idea of Feds giving out loans in huge sums suggest these Wall St. entities financial standing are not as healthy as it seems and I agree that this "loans" are sugarcoated term but technically, it is still a bailout meant to help these ailing companies. Imho.

[figmentofmyass]

This is quite an alarming development on Wall St. as I sense a grand conspiracy to cover up what could be an impending crisis among financial institutions where the collapse of just one major entity could trigger a ripple effect that could lead into a major financial crisis!

In the first place, the idea of Feds giving out loans in huge sums suggest these Wall St. entities financial standing are not as healthy as it seems and I agree that this "loans" are sugarcoated term but technically, it is still a bailout meant to help these ailing companies. Imho.

it's really a sign of a crisis of confidence. banks refusing to lend to one another to meet daily liquidity requirements is exactly what was happening during the 2008 crisis. it's certainly not a bailout, but it's ominous in terms of a potential financial crisis that could lead to bailouts.

[Google+]

This is quite an alarming development on Wall St. as I sense a grand conspiracy to cover up what could be an impending crisis among financial institutions where the collapse of just one major entity could trigger a ripple effect that could lead into a major financial crisis!

In the first place, the idea of Feds giving out loans in huge sums suggest these Wall St. entities financial standing are not as healthy as it seems and I agree that this "loans" are sugarcoated term but technically, it is still a bailout meant to help these ailing companies. Imho.

it's really a sign of a crisis of confidence. banks refusing to lend to one another to meet daily liquidity requirements is exactly what was happening during the 2008 crisis. it's certainly not a bailout, but it's ominous in terms of a potential financial crisis that could lead to bailouts.

I think finance can be seen as having a crisis like this because I think there are some groups that control the money in circulation throughout the country, because the technology that should be more advanced and developing does not create an economic crisis like this, the economy should grow and there are more rich people.

[Broly46]

Changing the yearly bailout to daily bailout didn’t improve the situation of how crappy Wall Street is doing, in facts it’s horrible one, they did cleverly deceit every depositor to think that their money are very safe since it’s managed every single day, I had no doubt we would soon have hourly bailout in near term, minutes bailout anyone? Or millisecond bailout. BTW, whether you want to invest on the stock market, chance are you buy or you sell it, you’re guaranteed to loss the bet, the market is a rigged trap, think about a professionally designed animal trap, a very good designer will know animal will jump pass the hole trap and they build a rope above the trap to rectify it, whether the deer want to jump over or move pass the trap, it is guaranteed to be caught, no matter how good the deer at gambling. And yeah it’s the same with stock market a zero sum game, they’re so rigged that this trap give you no chance to profit from buying or selling it, when you buy it, the price go down until you decide to cut your loss, and as soon as you clear your position on that stock, it go back up again to the high price, in hope to trap another gullible investor’s money, the DJIA is going up thru the roof, there is only one possibility, no body is buying DJIA, but the price are pushing up in hope that greedy bastard would want to get in for the profit, so that they can punish them severely for being greedy, how is DJIA pumping up fast when no body buying it? There is only one answer, the bailout money, daily bailout are a lot of money compare to yearly bailout, when the DJIA are high enough it would require more bailout money to pump it much higher, I think it would require hourly bailout once DJIA crossing 30,000, and minutes bailout on 40,000, millisecond bailout on 50,000, to the speed of light bailout for 60,000. Talk about the need for speed bailout, the high DJIA also bring one big problem to the table, the inflation, for those on the Wall Street inflation mean very little sense to them since they make profit from the bailout money, but for most peasant who make a living working for the corporate, it mean a lot, it can severe them financially, their pay check can’t afford to pay the expense, and many business would find it is difficult to sustain their business when the inflation kick in, their raw materials cost shooting thru the roof, many product based business slowly moving to the service based business to avoid entirely having to deal with inflating raw materials cost, eventually service based business would also moving to automation to further reducing the cost, at this rate of Wall Street bailout, I can see the entire economy to be ruined by one hopeless company that need endless supply of bailout money. And the timing that DJIA is pumping, it’s perfectly match with bitcoin price too, which also give trader no chance of trying to arbitrate profit from bitcoin to DJIA, which further fortify the facts that DJIA is a zero sum. I’m waiting to see whether bitcoin can get people to forget about the DJIA entirely, we have been stumble upon DJIA for too long that it have made too much buzz all over the media, to get people to get out of DJIA with an invention, I think it would take a lot more efforts, but DJIA is one persistent problem, it can’t be killed or completely erased from everyone memory, because it’s virtual and it take no money to maintain this index, when you can’t kill it, you join it, it is what DJIA have been designed from the very beginning, they are purposely designed to be immutable, the best analogy of buying DJIA in my opinion is same as buying Ripple, it is an oxymoron decision to me, because you’re buying a centralized, immutable, inflating, rigged and fake virtual business, what’s the point of stumble upon all this time, we don’t want to know why we need DJIA again at the first place, but it doesn’t matter as long as it make more profit to the Wall Street, they are more than willing to keep this floating to as long as eternity. They called it a healthy progress, the strong survive over the weak, and strong one is the one that is virtual and don’t require any money down to maintain it, a weak one which is the one require you to accumulate hard asset would slowly dying, is it even up to debate when thing are progressing from physical to something virtual, and there is money on the table that keep it afloat, and nope it’s not a status quo, it is all about survival of the fittest.

[CryptoBry]

The recent uptick in US stocks could represent market manipulation on the part of federal reserve, bailing out banks and wallstreet who are then throwing bailout capital at stocks to artificially inflate market value.

If Satoshi were alive and active today, I think he might take interest in the dealings of financial regulators and central banks who are continuing to adopt many identical practices today, which initially led to the economic crisis of 2008.

We are living in a world where manipulations are happening everywhere and unfortunately the world and market of cryptocurrency could not say it is free of manipulations as there are now many analyses that the many market rise in the past were caused by manipulations in one way or another. The big difference is that here in cryptocurrency, we are not directly or indirectly funding the manipulations just like what Fed is doing. All I say is that as long as we are still dealing with humans, there is no escaping  to encounter manipulations in different forms, types and sizes.

[bitsurfer2014]

This is quite an alarming development on Wall St. as I sense a grand conspiracy to cover up what could be an impending crisis among financial institutions where the collapse of just one major entity could trigger a ripple effect that could lead into a major financial crisis!

In the first place, the idea of Feds giving out loans in huge sums suggest these Wall St. entities financial standing are not as healthy as it seems and I agree that this "loans" are sugarcoated term but technically, it is still a bailout meant to help these ailing companies. Imho.

it's really a sign of a crisis of confidence. banks refusing to lend to one another to meet daily liquidity requirements is exactly what was happening during the 2008 crisis. it's certainly not a bailout, but it's ominous in terms of a potential financial crisis that could lead to bailouts.

Yeah, its more likely that we are now seeing the symptoms of a potential crisis, and I'm hope I'm wrong on that assumption! Perhaps I'm worried if  this will still continue which could indicate of a more serious problem - $690 billion per week sums up to $2.76 trillion per month! Sounds scary!

[CarnagexD]

This is quite an alarming development on Wall St. as I sense a grand conspiracy to cover up what could be an impending crisis among financial institutions where the collapse of just one major entity could trigger a ripple effect that could lead into a major financial crisis!

In the first place, the idea of Feds giving out loans in huge sums suggest these Wall St. entities financial standing are not as healthy as it seems and I agree that this "loans" are sugarcoated term but technically, it is still a bailout meant to help these ailing companies. Imho.

it's really a sign of a crisis of confidence. banks refusing to lend to one another to meet daily liquidity requirements is exactly what was happening during the 2008 crisis. it's certainly not a bailout, but it's ominous in terms of a potential financial crisis that could lead to bailouts.

Yeah, its more likely that we are now seeing the symptoms of a potential crisis, and I'm hope I'm wrong on that assumption!

They should start curing the symptoms for potential crisis as it will just get more serious and unavoidable. Way back late 2008 up to 2009 great recession happened and it caused a hell for the people and government dealing with unprecedented economic deep dive. Someone is right calling it sugarcoated behind the word to technically prefer it as borrowed. There is no way groups from Wall St. needs to borrow from feds and it can be hypothesize that these groups aren't financially healthy anymore. One thing's for sure, It isn't a bailout.

Perhaps I'm worried if  this still continue which could indicate of a more serious problem - $690 billion per week sums up to $2.76 trillion per month! Sounds scary!

That is a heck  a lot of money! This could go to a recession again from seeing it now and can cause devaluation and unemployment. They should be doing solutions now.