Did The Fed Just Experience A "Margin Call" Moment?

Tyler Durden's picture

Authored by Mark St.Cyr,

For those not familiar, the reference is attributed to a scene from the movie “Margin Call” where John Tuld (Jeremy Irons) makes the sanguinary argument for dumping its portfolio of toxic holdings immediately against contradictory arguments that it’ll be seen as panicking by others with the line, “It’s not panicking if you’re first.”

That one line in fiction contains volumes as to the reality about how Wall Street, bankers, and more view the world. Which is precisely why when I read the news that Federal Reserve member, and “Regulatory Point Man” Daniel Tarullo resigned unexpectedly I just sat back in my chair thinking, “Of course he did” as that afore-mentioned scene came to mind.

The reason why this sudden departure (remembering his term expires in 2022 some 5 years away) inspired thoughts as the above  that will surely be met with retorts such as “tinfoil wearing, conspiracy type” nonsense was not just the timing. But his resignation letter. To wit:

“After more than eight years as a member of the Board of Governors of the Federal Reserve System, I intend to resign my position on or around April 5, 2017. It has been a great privilege to work with former Chairman Bernanke and Chair Yellen during such a challenging period for the nation’s economy and financial system.”

Yep, that’s it. No alluding “health reasons.” No “need more time with family” qualifiers. Nor, anything else. Just a corporate styled, “Thanks, see Ya!” as to vacate 5 years early one of the most prestigious jobs in banking (Board of Governors) with quite possibly one, if not “the” most powerful agencies in the world, bar none. e.g., The Federal Reserve. Right, “Nothing to see here people, just move along, thanks for stopping by.”

If this doesn’t ring alarm-bells, than I guess Barron’s™ is right and “Next Stop Dow 30,000” here we come! Or, was that cover-story what signaled Mr. Tarullo to heed what it may portend (i.e., marking market tops) and thought, “Getting outta Dodge” before this thing falls apart first was the next prudent banking and career move? All one can do is speculate.

That said: It’s a fun thought experiment on one hand. But on the other? All I’ll say is this:

If you’re into market signals? These aren’t what you want to see emanating from the Fed. if you’re one of those still buying every dip horns-over-hooves. Because the next “dip” just may be a cliff. That is, unless you’re a vaunted investment “guru” on CNBC™ and your mail arrives 2 days late crushing your prior invest advice to then flip, then flip again only 6 days later back to what you argued was wrong to begin with. But I digress.

So again: Why would a member of the Fed suddenly resign?


And that one word, much like the one line from the movie speaks volumes. The difference this time? It’s not in a fictional setting – it’s reality. And what it portends doesn’t have anything close to the intention of any movie. e.g., entertainment.

No, these signals are troubling at their root cause. i.e., The realization that the entire monetary system may in fact be teetering on the verge of chaos. And the finger-pointing has already begun directed squarely at central bankers, and in particular The Fed.

The abdication, its timing, along with its terse reasoning reinforces the argument that things are not as “great”, or “under-control” as the powers that be (e.g., central bankers) would have one believe. Especially from an institution that is supposedly hell-bent on making sure “signaling” or “policy” interpretations are delivered in a manner as to not be misconstrued.

From the outside looking in, it would appear either someone didn’t get that memo, or didn’t care.

The only thing more concerning is, if they did – and still didn’t care.

Again, there seems to be far more to this resignation by the very manner in which it was brought forth. And that’s not an “interpretation problem” for others to overcome. No: That’s a problem of interpreting at face value anything now emanating from the Fed. Period.

Why? I’ll propose it’s occurring at precisely the exact wrong time where “believe” and or “trust” that the Fed. knows or understands the implications of its decisions are needed.

And what is the current Fed. “smoke signals?” Utter shambles for anything resembling coherent, concise messaging.

Think I’m exaggerating or being hyperbolic? Fair point. Here’s just a few of the prevailing “arguments” one needs to try to decipher when attempting to understand current monetary policy and what it may, or may not, portend for the future.

One down, (e.g., Mr. Turullo) how many will follow? e.g., Is Fed. Governor Lael Brainard next? After all, Ms, Brainard was not only an ardent supporter of Mrs. Clinton, but she also appears misaligned with current policy messaging. i.e., Not to keen about hiking rates.

Or how about other arguments, along with statements such as this from Vice Chair Stanley Fischer: “There is quite significant uncertainty about what’s actually going to happen, I don’t think anyone quite knows.” when responding to a question about future fiscal policy which may, or may not, be forth coming in the U.S.

To me, the real trouble was what followed when he said: “At the moment we are going strictly according to what we see as our responsibility according to law.”

So, maybe it’s just me. But I’m quite sure that his boss, Chair Yellen, quite confidently alluded to at the last FOMC presser exactly what was needed and forthcoming, regardless of what came out of the current administration. i.e., Three rate hikes (via the Dot Plot) and possibly even more should they (The Fed.) see fit in reaction to anything “fiscal.” Has that changed? Again? And if it hasn’t? Is that still not an even bigger problem for the “markets?”

If the above referenced conference and articles are any clue? The messaging, and signaling are bordering on incoherent. Again!

Think there’s no reason to “panic” if you’re on the inside, let alone trying to gain insights from the outside looking in?

Remember when the scariest notion viewed by Wall Street was the possibility that the Fed. would even consider, let alone float the idea of winding down its balance sheet first, before exhausting all other “tools” or options? How many “think tank” aficionados along with the gaggle of Ivy Leagued Ph.D economists touted such a thing as “crazy talk” when the notion was ever brought up?

This even caused the former Chair to take to the keyboard on Jan. 26th 2017 and ask (or plead) that it wasn’t so.

Can you say “Oh, Oh?”

From St. Louis Fed. President Bullard’s discussion on 2/9/2017 for 2017 Monetary Policy. To wit:

“Now that the policy rate has been increased, the FOMC may be in a better position to allow reinvestment to end or to otherwise reduce the size of the balance sheet,”

So, are we to infer that if we are to get only one or two rate hikes, what we might actually see concurrent with that is the only other thing deemed even scarier in the eyes of Wall Street? e.g., Selling by the Fed. rather than buying?

Again, can you say, “Oh, Oh?” Or is this all “conspiracy”, “tin-foiled” cap wearing crazy talk?

Could be. Or, it could be fiction transforming into reality straight out of a scene in “Margin Call.” After all, as of November 15, 2016 Mr. Tarullo’s position was to carefully watch market reaction to Trump administration. And his conclusion?

Hint: Re-read the first paragraph while remembering: When it comes to “bag holders?” That’s not in their job description, that’s yours.

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Zero-Hegemon's picture

"It's not panicking if you're the first commentor"

Raffie's picture

I identify as being first so.... you know.

Rickety Rekt's picture

Don't assume my post-timing!

Zero-Hegemon's picture

It's Ok, I'm obnoxious and people still talk to me. It gets better

StackShinyStuff's picture

I identify as "positionfluid".  Sometimes I consider myself first and sometimes I consider myself second.

TwelveOhOne's picture

"These people looked deep within my soul and assigned me a number based on the order in which I joined." - Homer Simpson

InsaneBane's picture

The globalists and libtards will eat dirt and cast out in the cold world we know and will endure..

Jim in MN's picture

You have to be trusted

By the people that you lie to

So when they turn their backs on you

You'll get the chance to put the knife in

--Pink Floyd

clove's picture

The FED (and all central banks) runs on one thing and one thing only: citizens' trust in the value of the national currency. All transactions, policies, and rates are based on faith in the dollar. 


This is why, by the way, the Fed is so anti-gold. Gold is easy to trust in. The value of gold is clear from its physical appearance, from its scarcity, from the fact that people in every country value it. 


If and when the dollar and/or Fed crashes (they are the same thing), people will fall back on gold, which is not controllable. You cannot put rates on gold. The only thing the government can really do is heavily tax it (at 28%, by the way) or attempt to confiscate it.


It's funny how something unregulated works just as well as a currency as a created instrument that is highly regulated. It makes one question why we even need the Fed. The Fed exists to justify their own purpose, seemingly.


The Fed can do some good, but name the last time it actually has? I can give you some examples of the BoJ running some successful policies during the lost decade, but the Fed...?


All we see here is a vast, empty desert, hiding buried opportunities.

O C Sure's picture

"You cannot put rates on gold."

Not sure what you mean by that. Say I work and save 100 units of gold. You come to me with a great idea, how to produce value from it, and propose what it will take to make it happen. All you lack is the means to make real things from no thing. You convince me of your dream and I too see the viability of such a venture. I vest in you 10 units of my productive work, gold. I supply your demand. You supply my demand  by agreeing to return my 10 units of gold and 2 more units at a specific date. It is only in my interest to part with my 10 units if I can receive 12 back. It is in our interest that I am free to choose this agreement because no one knows better with whom to vest in with my savings than me.

This is not just a win win engagement. This is a win win win course of action IF it is successful. I win, you win, AND whomever gains value from the value the venture produces wins (likewise the course is a chain reaction to all who produce value to gain value; win win win...etc.) No where is there a LOSS of value.

On the other hand, if I do not have 100 units of my productive work saved and I vest in you as if I do then what is my risk? What do I stand to lose if I begin with nothing? What is my incentive to calculate the risk of not receiving my hard earned savings, and then some, in return for my good assessment of the venture?

To say rates cannot be put on gold, that is the savings possessed by productive work, is to have a catholic faith in the actions of the banking monopoly and to not see clearly the relationship between the vestor, the vested, and the vestment.

Misean's picture

Well, I'm going to guess that he meant that a central bank cannot do so when gold is freely exchangeable. Note the word "FREELY" it's important. In such a situation, The CB COULD say offer rates lower than any other holder of gold. This could have a short run tendancy to drive down some other's rates, BUT, the CB would have to eat all the risk it created for itself. If the spread between th CB and the market were large the likelyhood is that the CB would simply go tits up and would no longer BE a CB and the gold would be in other more capable hands.

If the converse, the CB rate above market rate, then (assuming the CB has a significant chunk of available gold), the deflationary price preassure created would increase the IRR of the other banks, such that they'd likely be willing to lower their rates. A CB sitting on a stagnant pile of gold without much income could pay it's expenses out if its stores for a while, but the same result as above would occur.

In other words, "RATES" implying "MARKET RATES" cannot be controlled by a CB. YOUR rate can be whateverr you want it to be. If YOU are too high, you won't get any takers except vagabonds and schemers. If you are too low, you'll likely go BK.

Ckierst1's picture

We don't need it.  End the Fed.  Central banking is a tool of the globalist banksters to impoverish nations, reducing their citizens to serfdom, and to enrich the globalist oligarchs.

doublerunningflat's picture

Indeed. I think it's more important now what Trump will do with taxes than what the Fed's move will be. 

Capital Properties FX


Jim in MN's picture

The Deep State globalist establishment has to crash the markets/economy to try to stop Trump ('resist').

It is in the Fed's interest therefore to start throwing a LOT of smoke around, to clutter up the narrative and make it harder to follow their tracks.

So, you know, 'policy incoherence' is its own message, if you know how to read it.

By the way Ivanka Trump items are still available at macys.com but they are selling out fast.  Happy Valentines Day.

RU4Au's picture

I hope this doesn't mean we get to endure people waiting around for a new article to get bragging rights on how fast you can post that you have bragging rights. Let's leave that to Turd Ferguson's site. It got old there , too.

Snippy21's picture

Ding frys are done!

shovelhead's picture

Time to go shag the sheep in New Zealand before the pitchfork brigade gets rolling.

Yen Cross's picture

 Who remember " Private Equity" groups?  Scumbags forming LLC and taking the write offs.

 Most of the shopping centers you buy your groceries at/in, are owned by " Private Equity" dark money groups.

 It's just layering reciprocity.

BlueHorseShoeLovesDT's picture

Wake me up when Janet resigns

Tlön Uqbar's picture
Tlön Uqbar (not verified) Feb 13, 2017 11:28 PM

When the FED has anything "coherent" to say it is too late.

All the FED does is blather nonsense to the hoi polloi, follow orders from it's disorganized inbred handlers, and pretend.

What the FED needs most is collusion and legitimacy to rip off nations and make land holders renters. That means your government.

If someone quits the FED, it's bullshit.

If someone disagrees with the FED, it's bullshit.

There are no loose canons (cannons? edit) at the FED. There is no armchair bemusement. People do get fired. They fuck up and get fired. They can't hack it and there's 1000 people in line behind them with tow chains and royal arches.

Said it in the article. A "governor" grovelling at a "chair". What kind of fucking sick Edwardian faggot pledges to a chair? It's a throne. A throne is a chair. Fucking stupid. No need to evidence "why".

That's why "I'm out". Nothing else. The "Chair" has to fire politely and that's all folks.

Otherwise, see what this guy (if he even exists) does next.

Fuck the FED and it's inbred family. Truly, this is nothing to even ponder besides how up the ass the author is. He gives the FED some weight and that is like waiting for the poppies to mature in Afghanistan. That's some Wizard of Oz shit. There's no place like home.

gregga777's picture

The Goldman Sachs Feral Reserve System is merely signaling to all their insider friends that they are going to crash the market just like they've done so many times since 1929.

BigFatUglyBubble's picture

It is part of their doctrine to give cryptic warnings.  They feel it absolves them of bad karma.  "The muppets deserve it because they didn't read between the lines," they say.  I don't agree.

Fake Trump's picture

I thought Trump had said "I will fire Yellen if I became the president".  

WTFUD's picture

At the end of her term.

Paracelsus's picture

  I always liked the late night board meeting where the young lad (spock?) gets up

and explains how they have to take the toxic crap back onto the books for a month,

temporarily,while they layer and structure the "investment vehicle".

 Only the market turned sour, people were more than ninety days late on their

 mortgage payments, and the MBS crap started to stink like a large turd.

  Then they couldn't sell the stuff, and so had a "fire sale" to unload the stuff

on unsuspecting overseas pension funds who never do due diligence for their

clients. Fabricate a product. Fabricate a market. Get out early before the mugs.

 If your brokerage house goes under because the share price has slid 90%, then

scream like a newborn that you need a bailout. High risk/ High yield....

 Rinse, wash, repeat...

PS. I liked the way they made the young lad a propulsion engineer (rocket scientist).

Nice touch. Wall Street. An industry that produces nothing, at great cost to society....

captain-nemo's picture

This is the kind of articles i really enjoy reading here on ZH. 

When this guy suddenly resigned, it kept me wondering too, but this is the first time i have seen someone actually comment it.  

In my view we almost never see people resign from these kind of positions , because these people looks upon themselves as Gods that are on some kind of personal mission to save the world. They are not living in the same reality that you and me are living in and they are probably not capable of understanding the complete madness of what they are part of.  


Maybe this guy was an exception . Maybe he had some kind of moral left, and when he finally understood what was going to happen pretty soon, he wanted out before his names got smeared forever. 

tuetenueggel's picture

maybe he´s afraid, getting hanged for other poples´ criminal past.

nevadan's picture

Tarullo is not the only one,


Release Date: February 8, 2017

For release at 11:30 a.m. EST

Scott G. Alvarez, General Counsel, will retire later this year after nearly 36 years of service to the Federal Reserve Board, including more than 12 years as head of the Legal Division. The Board will begin a search for his successor.

Hmm...  like rats on a sinking ship?

kw2012's picture

I don't think he resigned because what is going to happen. I think he resigned BC the Fed came clean about what they have really been up to and we are screwed. Trump can't disclose the illegal methods the Fed used BC the market and economy would collapse followed by the government 

Yen Cross's picture

 Tyler, lets come clean.  Bill  O'Reily is a neocon douche???

  I just bought a beautiful piece of property.

flyonmywall's picture

Just remember, if its bits and bytes or paper, you don't own it. It's already been re-re-hypothecated.

Keep stackin' ladies and gents. Don't forget to include some spagetti, and some sauce. Add a bit of the spicy stuff, and the dull grey metal. Season to taste.


flyonmywall's picture

Just remember, if it's bits and bytes or paper, you don't own it. It's already been re-re-hypothecated.

Keep stackin' ladies and gents. Don't forget to include some spagetti, and some sauce. Add a bit of the spicy stuff, and the dull grey metal. Season to taste.


Dragon HAwk's picture

You walk into the meeting, everybody looks at you, and then they offer you the chair right up close to the Boss.

  maybe that's what the Fed is smelling,  Somebody is about to pin the tail on the Donkey,  and your The Ass. that's going to get Blamed.

WTFUD's picture

People still talk about the Fed as if it's a Mythical Creature when it's Central Command for Extortion.


JBPeebles's picture

The Federal Reserve hasn't met with Trump, has it? Do these meetings ever occur? Is Trump going to erect a throne wherever the Fed meets, like Caesar in the Roman Senate?

My guess is that there would be friction, especially once it's clear the Fed's interventions have helped some more than others. The Plunge Protection Team is at the heart of the potential problem. Perhaps the circumstances under which interventions occur have been expanded.

I mean there's a reason for the Fed to intervene under some special circumstances. But my gut instinct is that the banks got to dipping into the cookie jar to help themselves.

Of course you can't justify Fed interventions purely to boost your stock price. Or could you? I mean there's nothing saying that market pumping action didn't occur on an opportunistic basis.

I think the post-Trump intervention was done for the bankers' benefit. Goldman stock nearly doubled. It was billed as being a Trump rally but that's a market narrative inserted post facto and the facts were it was a brief and unexpected event, and narrow. Circumstantial yes but now with Fed defections we may have remorse. If Trump finds outs that the PPT's role has expanded and it's become a tool to pump selective stocks, bad things could happen.

Everyone at the Fed is at risk of Trump's rage. He could react unpredictably to the news his election was an excuse for a pump'n'dump. Then again, Goldman people are positioned to perhaps hide the Fed's darker machinations but I'm guessing Trump will find out. Will it be a Flynn moment for the Goldman people who get to brief Trump on what really went on? He might let slide what happened under Obama but he may take the gold beatdown/pump'n'dump differently as it was after HIS election.

sinbad2's picture

Why would a member of the Fed suddenly resign?


Any number of a thousand reasons, maybe he fell in love, maybe he is dying, maybe he just can't stand the job.

This is just conspiracy BS.

Erwin643's picture

With SVXY still above it's 4 and 10-day M.A's.... Whatever.

oncemore's picture

What does he know? Will he follow Scalia?

Davidduke2000's picture

Probably trying to escape the blame for destroying the American economy and causing the worst depression in the history of the world.

just the tip's picture


i only gave you a +1 because the number of zeroes i would put after it would look absurd.

firestarter_916's picture


  • noun

1. sudden uncontrollable fear or anxiety, often causing wildly unthinking behavior


I tend to believe, by definition, the first one to pull the ripcord, is the one doing the panicking.

kw2012's picture

basically the Fed screwed Trump. POTUS found out the illegal sleazy stuff and forced him to resign but can't release why because the market and economy would collapse. end of story