President's Working Group

Fireworks Fly As Peter Schiff Warns "An Economy That Lives By QE, Dies By QE"

Ahead of tomorrow's decision by the FOMC, Peter Schiff ventured on to CNBC to discuss the economy, the fed, and gold... among other things. Schiff rightly fears that while the Fed may well stop QE3 tomorrow, QE4 will not be too long behind it as he notes, rather eloquently, that "an economy that lives by QE, will die by QE" as the Fed's total lack of willingness to allow stocks to fall (see Bullard 2 weeks ago) or a 'cleansing' recession leaves the nation's economy in far worse shape than it was before the Fed's intervention. Schiff calmly replies to the anchor's questions (as she proclaims "I am not on the side of the Fed but..."), gently explains his view on gold when challenged about his 'wrongness', but when a guest starts hounding him for being dangerous to CNBC viewers wealth... Schiff (rightly) loses it - must watch!

This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied - The Sequel

Two years ago, in January 2010, Zero Hedge wrote "This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied" which became one of our most read stories of the year. The reason? Perhaps something to do with an implicit attempt at capital controls by the government on one of the primary forms of cash aggregation available: $2.7 trillion in US money market funds. The proximal catalyst back then were new proposed regulations seeking to pull one of these three core pillars (these being no volatility, instantaneous liquidity, and redeemability) from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal would give money market fund managers the option to "suspend redemptions to allow for the orderly liquidation of fund assets." In other words: an attempt to prevent money market runs (the same thing that crushed Lehman when the Reserve Fund broke the buck). This idea, which previously had been implicitly backed by the all important Group of 30 which is basically the shadow central planners of the world (don't believe us? check out the roster of current members), did not get too far, and was quickly forgotten. Until today, when the New York Fed decided to bring it back from the dead by publishing "The Minimum Balance At Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market FUnds". Now it is well known that any attempt to prevent a bank runs achieves nothing but merely accelerating just that (as Europe recently learned). But this coming from central planners - who never can accurately predict a rational response - is not surprising. What is surprising is that this proposal is reincarnated now. The question becomes: why now? What does the Fed know about market liquidity conditions that it does not want to share, and more importantly, is the Fed seeing a rapid deterioration in liquidity conditions in the future, that may and/or will prompt retail investors to pull their money in another Lehman-like bank run repeat?

Presenting The Exchange Stabilization Fund In 5 Parts: Is This The Real "Plunge Protection Team"?

When it comes to the fabled President's Working Group on Capital Markets, also known as the Plunge Protection Team, the myths about the subject are certainly far greater than any underlying reality. To be sure, vast amounts of popular folkflore has been expounded into the public arena, with most of it being shot down simply due to it assuming conspiracy theories of such vast scale that the human mind is unable to grasp the complexity, and ultimately the inverse Gordian Knot makes an appearance with the claim that vast conspiracies are largely untenable simply because it is impossible to keep a secret from so many people for so long. Yet what if the secret is not a secret at all but is fully out in the open, and is only a matter of interpretation, and contextualizing? Why just 3 years ago it would appear preposterous to allege the capital markets are a ponzi and that the Fed does everything in its power to keep stocks higher. Well, what a difference three years make: now the Chairman himself in a Washington Post OpEd has admitted that the sole gauge of Fed success is the loftiness of the Russell 2000, neither unemployment nor inflation really matter now that the Fed's third mandate has been fully whipped out. Furthermore, Keynesian economics, and the entire top echelon of the educational system have also been accurately represented as a paradigm which merely perpetuates the status quo as the alternative is the realization that the whole system is a house of cards. As for the global capital markets being nothing short of a ponzi, we merely point you to the general direction of Europe, the ECB and the continent's banks, where the monetary interplay is nothing short of the world's biggest pyramid scheme. Yet the PPT, or whatever it is informally called, does not exist? Consider further that only recently did it become known that the former SecTres Hank Paulson himself was exposed as presenting material non-public information to a bevy of Goldman arb desk diaspora hedge funds, headed by with none other than the head of the President's Working Group on Capital Markets Asset Managers committee David Mindich. So, if contrary to all the evidence that there is some vast underlying pattern, if not a conspiracy per se, one were to take the leap of faith and take the next step, where would one end up? Well, most likely looking at the Exchange Stabilization Fund, or ESF, which Eric deCarbonnel has spent so much time trying to unmask. Is it possible that the ESF, located conveniently at the nexus between US monetary policy, foreign policy and last but not least, a promoter of the interests of the US military-industrial complex, is precisely the  organization that so many have been trying to expose for years? Watch and decide for yourself.

Hank Paulson Tipped Off The Goldman-Led "Plunge Protection Team" About Fannie Bankruptcy 7 Weeks In Advance

Today, BusinessWeek's Michael Serrill and Jonathan Neumann have released a blockbuster report based on a FOIA response by the Treasury, which proves that in America rules are only for little people, that this country has been a banana republic for years, that Animal Farm was spot on, and gives excruciating detail of how Hank Paulson tipped off a select group of Goldman diaspora hedge fund managers about the eventual failure of Fannie and Freddie 7 weeks ahead of this information becoming public knowledge. The report basically is a summary of a meeting that took place at the offices of Eton Mindich's Eton Park headquarters on July 21, 2008, 7 days after his famous '“If you have a bazooka, and people know you have it, you're not likely to take it out," speech and 7 weeks before both GSEs effectively filed for bankruptcy and were put into conservatorship. Now if it only ended there it would have been fine - a case of potential criminal collusion between the government (although nothing specific against Paulson as he didn't actually trade: he just made sure his former Goldman colleagues made money), and the 0.00001% in the face of a few multi-billionaires who most certainly did trade on material non-public information sourced by Hank. Where it however gets worse is when one considers the actual role of one Eric Mindich in the hierarchy of the Asset Managers' committee of the President's Working Group on Capital Markets, better known of course as the PPT: a topic we discussed first back in September 2009 when we asked "What Is Goldman Alum Eric Mindich's Role As Chair Of The Asset Managers' Committee Of The President's Working Group?" Back then we did not get an answer. Luckily, courtesy of a few answered FOIA requests, some real investigative journalism, and not reporting for the sake of brown-nosing just so one can get soundbites for their next name dropping "blockbuster" and straight to HBO movie, we are starting to get the full picture of just how high in US government the Goldman Sachs controlled "crony capitalist" adminsitration truly runs.

Tracking The Gold "Conspiracy" - GATA's Must Read Presentation To The Cheviot Asset Management Sound Money Conference

GATA has compiled what is probably one of the best and most comprehensive reports on the history of the gold market, the "special" place gold holds in the central bankers' world, the interaction between the physical and gold paper markets, and the documented historic evidence and definitive proof that the gold price has long been the most manipulated concept in the history of modern capital markets. Must read for all interested in the dynamics behind the price of gold.

Morning Gold Fix: January 13

Gold and silver have fallen by less than 1% in all major currencies today. Asian equities were mixed with strong selling seen in India and European equities and US index futures are tentatively higher. Eurozone periphery bonds yields have fallen as have those in Germany (10 year) after rising above 3% in recent days.

As Bangladesh Stock Market Plunges Again, Local Investors Riot For Second Time In A Month

If there is anyone watching this video of what happens to a banana republic when its ponzi stock market plunges, it is Ben Bernanke. The Princeton-educated depression era expert is certainly learning from the mistakes of the Bangladesh stock exchange (flash crashing 9.25% at last check before being halted), which despite US investment bank pitches to the contrary, never instituted its own plunge (and subsequent riot) protection team. And this is despite an identical situtation happening just three weeks earlier. Take home message: every ponzi scheme-based banana republic needs its own President's Working Group on Flash Crash prevention.

Betting On An Infinite Bernanke Put? Not So Fast, Says Fed Governor Kevin Warsh

Last week's Op-Ed du semaine was Ben Bernanke's WaPo glowing endorsement of the Fed market put, whose sole purpose was to remind stocks, which ended up drooping on the day QE2 was announced, that Bernanke will stop at nothing to achieve his now primary goal (as loosely interpreted under the Fed's broad, and unsupervisable, mandate) - surging stock prices. This week, however, may likely belong to Fed Board Governor, and former member of the President's working group on capital markets, Kevin Warsh. In an Op-ed just released in the WSJ, Warsh, whose series of accomplishments include being the youngest ever appointee to the Fed BOD at 35, and being married to Jane Lauder of Estee Lauder fame, writes "Lower risk-free rates and higher equity prices—if sustained—could
strengthen household and business balance sheets, and raise confidence
in the strength of the economy. But if the recent weakness in the
dollar, run-up in commodity prices, and other forward-looking indicators
are sustained and passed along into final prices, the Fed's price
stability objective might no longer be a compelling policy rationale
. In
such a case—even with the unemployment rate still high—we would have
cause to consider the path of policy. This is truer still if inflation
expectations increase materially.
" Translation: if gold continues to exhibit a beta > 1 w/r/t ES, then we are screwed, and all Fed policies will have failed. Elsewhere, look for most commodities to open limit up again tomorrow for the nth day in a row as inflation expectations continue to "increase materially" and more and more Fed members understand just what Warsh is saying.

Michael Pento Says Fed Will Buy Stocks And Real Estate In Its Next Attempt To Create Inflation

As part of the Fed's latest QE iteration, it has already been made clear that despite initial disclosures that the Fed would stay in the 2-10 Year bound of Treasurys, Ben Bernanke is now also gobbling up the very long end of the curve. For all those who are, therefore, still confused why bonds continue to surge to record levels, don't be: when there is a guaranteed bidder just below you in the face of the Fed, and who you can turn around and sell to at will, there is no pricing risk. The problem, from a bigger stand point, is what happens when the Fed is actively buying up 30 Year bonds with impunity and the much desired (by the Fed) inflation still does not appear? Well, the Fed then, in Michael Pento's opinion, will begin to purchase stocks and real estate. And as all those who enjoy comparing the US to Japan can attest, outright purchases of securities by the Japanese government is a long-honored tradition in the ongoing fight with deflation in Japan. However, and as the recent BOJ (lack of) intervention demonstrated, Japan never could do anything with the required resolve, and bidding up one stock and there piecemeal would never achieve anything. Which is why in this interview with Eric King, Michael Pento makes the case that as opposed to the occasional market intervention via the President's Working Group, Bernanke will soon make stock purchases an outright policy of the Federal Reserve as its last ditch attempt to engender inflation before the hundreds of billions of Commercial Real Estate and other debt starts maturing in 2011/2012. Bernanke is running out of time and he knows it. And once the Fed become the bidder of last resort in stocks, all bets are off, as the Central Bank will become the defacto only market in virtually every risky category. And the only safe vehicle, once the market then begins to price in asset-price hyperinflation, will be gold.

Chopshop's picture

In order to manipulate bond fund NAVs, two employees "actively screened and manipulated dealer quotes", "fraudulently published NAVs", made "price adjustments" that "were arbitrary and did not reflect fair value." The list keeps going. "This scheme had two architects - a portfolio manager responsible for lies to investors about the true value of the assets in his funds, and a head of fund accounting who turned a blind eye to the fund's bogus valuation process," - Robert Khuzami, Director of the SEC's Division of Enforcement. Sharp Mary barked today. FINRA & the SEC bit.

Chopshop's picture

Before delving into an ECB speech chock full of insight, a deflationist rant 'Through the Looking-Glass' of social mood as per:

[1] the management of inflation expectations;

[2] the implications within central bank (CB) exit strategery; and

[3] 'what Alice is likely to find' in Mr. Market's immediate future. If you think Bernanke an idiot and see hyperinflation-a-coming, you probably don't wanna read this.

rc whalen's picture

This week in The IRA, we remind one and all about the impending FDIC rule-making process on bank securitizations. Then we ponder whether zombie love won't bring together Barclays Bank and Citigroup in an unholy but politically fortuitous union. And we feature an interview with derivatives market veteran Bill King about OTC derivatives and earnings fraud. The rant on the President's Working Group follows below. -- Chris

Bob Corker, Humiliated By Chris Dodd, Joins The Fed Bashing Brigade; In The Meantime Ted Kaufman Shows Everyone How It's Done

Earlier today political corpse Chris Dodd said that he would proceed with unveiling a financial reform bill on Monday without Republican participation, in a humiliating blow to Bob Corker, who was most recently seen doing all he could to help his Wall Street colleagues make sure the Volcker plan would never see the light of day. Yet with recent rumors out of Washington that not only is the Volcker plan alive and well, the double whammy for Corker may be coming any day. So what does the Tennessee Senator do? He joins the Fed bashing brigade. Among his remarks from his conference given today after his was "fired" by Dodd, was the observation that the "Fed will have its wings clipped in reform" and that the "Fed is lobbying hard to protect its marble buildings." No doubt Senator: it is people like you who make Fed (and broader Wall Street) lobbying efforts quite easy. We hope that you and all your other bought and paid for colleagues in the Senate can learn from Senator Kaufman, whose speech on financial reform we already posted earlier, but which needs to be read and understood by all who are serious about regulatory reform, instead of puppets like Chris Dodd who huff and puff, yet only want to secure a friendly donation paycheck from his core Wall Street constituency, well into his retirement days.