"Secret" documents and power struggles aside, regulators are just as inept now as ever and bank stress tests are completely meaningless, as the Fed neither then, nor now, has any methodology for how to calculate capital in case of the same kind of counterparty failure chain as happened during Lehman, and when no amount of capital would have been sufficient to preserve the financial sector.
Now that Europe has demonstrated that one can go NIRP and not crash the system, will the Fed - once its silly obsession with hiking rates in the summer only to launch even more easing and/or QE as the ECB did in 2008 and 2011 - follow suit and join a rising tide of "developed" world central banks in punishing savers for hoarding cash? In a note released last night titled "Revisiting Negative Interest Rates in the US", Goldman shares its thought on the matter. It goes without saying that Goldman is important, because whatever Goldman's econ team shares with Goldman's Bill Dudley over at the NY Fed, usually tends to become official policy with a 3-6 month lag.
Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."
"I’m tired of being outraged!"
Having recently given us a two paragraph synopsis of all that is wrong with our financial market faith in fed officialdom, Jim Grant unleashes his critical wit and insight on CNBC to explain the Fed's new remit, as Bill Dudley recently explained, "the administration of American equity prices." The Fed will find it difficult ro raise rates - both technically (for reasons we have explained in detail previously) and "they will find many blocks in the way having to do with financial markets' reaction." Simply put, the Fed wants to raise rates but mostly it wants peace and quiet, which it does not have: "The Fed is America's central bank but it is the steward of the world's currency," and as Grant concludes, "it is raining currencies around the world... and the Fed must be coginizant of that."
It is amazing the speed at which FOMC officials have embraced not falling oil prices but collapsing crude. The pace of the decline is being driven, contrary to the fracking miracle, by the fact that nobody seems to want to bid on the stuff. That is, as I noted earlier, a demand problem. But officials like Fed Vice Chair Stanley Fischer and FRBNY President Bill Dudley are saying that these lower oil prices, due to lower demand, will end up boosting demand – big time. That is the essence of their argument, that recession is the latest “stimulus.”
"Let me be clear, there is no Fed equity market put." Bells are ringing for stocks...
Dudley’s overall message is that the US economy is doing great, but it’s not actually doing great, and therefore a rate hike would be too early. Or something. "The sharp drop in oil prices will help boost consumer spending?" We don’t understand that: Dudley is talking about money that would otherwise also have been spent, only on gas. There is no additional money, so where’s the boost? This is just complete and bizarre nonsense. And that comes from someone with a very high post in the American financial world. At least a bit scary.
"... Shortly after returning from a trip in late 2009, Farmer erased electronic notes, in Microsoft Word format, that were stored on thumb drives, Zip drives and a shared drive at Citadel, agents wrote in a summary of one of the interviews with him. Farmer also threw away his handwritten notes because that was his normal practice and because they were incriminating, agents wrote. Farmer got rid of e-mails as well, according to their summary. “This,” they wrote, “wiped the slate clean."
Here Is The Only Thing You Need To Know As Goldman's|New York Fed's Bill Dudley Testifies To The SenateSubmitted by Tyler Durden on 11/21/2014 11:55 -0400
As everyone listens in silence as Goldman's New York Fed's Bill Dudley gets emotional during his Senate Banking Committee testimony, and his only response to why there is Goldman capture of the NY Fed being that $3 trillion in Fed excess reserves have made banks "stable", yet why absolutely nothing will change, there is only one thing everyone needs to see to understand just how the system works. Presenting the total donations by Goldman Sachs to members of Congress in 2014 alone.
Just days after the NY Fed ousted an employee for providing confidential information to a Goldman Sachs banker (who formerly worked at the NY Fed - and has since been fired by Goldman), Bill Dudley - the president of the NY Fed - will face a very skeptical Senate Banking Committee this morning investigating so-called "regulatory capture." Of course, their eyes were finally opened after Carmen Segarra, a former employee, leaked 47.5 hours of taped conversation (as we discussed in detail here), exposing the dismal reality of the relationship between the 'regulator' and the 'regulated' as New York regulators were deferential to Goldman bankers for a supposedly "shady" deal. Dudley's defense (not denial) so far: "We understand the risks of doing our job poorly and of becoming too close to the firms we supervise. Of course, we are not perfect. We sometimes make mistakes."
Because when the rape and pillaging of the US middle-class begins at the very top, it won't end until the sharp metal objects finally start falling.
Carmen Segarra said, “I come from the world of legal and compliance, we deal with hard evidence. It’s like, we don’t deal with, you know, perceptions.”
How ironic. Segarra worked at the Fed.
Bill Dudley Responds To Charges NY Fed Is Controlled By Goldman Sachs: "Nobody Should Question Our Motives "Submitted by Tyler Durden on 10/02/2014 14:15 -0400
“I completely stand behind the integrity and work of our supervision staff,” he said after a speech today in New York. “They are operating completely in the public interest.” Dudley said there has been a “significant reorganization” following a report commissioned by the regional Fed bank, and that “improving supervision has been and remains an ongoing priority for me.” “I don’t think anyone should question our motives and what we are trying to accomplish,” Dudley said today in defense of his institution. “Examiner independence is completely paramount.”
"The Markets Group at the Federal Reserve Bank of New York manages the size and composition of the Federal Reserve System’s balance sheet consistent with the directives and the authorization of the Federal Open Market Committee (FOMC), supports debt issuance and debt management on behalf of the U.S. Treasury, provides foreign exchange services to the U.S. Treasury and provides account services to foreign central banks, international agencies and U.S. government agencies. Markets Group is establishing a presence at the Federal Reserve Bank of Chicago and has openings for both experienced professionals and recent graduates.
I don't want to spoil the revelations of "This American Life": It's far better to hear the actual sounds on the radio, as so much of the meaning of the piece is in the tones of the voices -- and, especially, in the breathtaking wussiness of the people at the Fed charged with regulating Goldman Sachs. But once you have listened to it -- as when you were faced with the newly unignorable truth of what actually happened to that NFL running back's fiancee in that elevator -- consider the following:
- You sort of knew that the regulators were more or less controlled by the banks. Now you know.
- The only reason you know is that one woman, Carmen Segarra, has been brave enough to fight the system. She has paid a great price to inform us all of the obvious. She has lost her job, undermined her career, and will no doubt also endure a lifetime of lawsuits and slander.
So what are you going to do about it? At this moment the Fed is probably telling itself that, like the financial crisis, this, too, will blow over. It shouldn't.