Chris Whalen

Chris Whalen: "Why The Fed Must Let Rates Rise"

This week all eyes are on the Federal Open Market Committee (FOMC) and Federal Reserve Chairman Ben Bernanke. The FOMC must decide whether to stop monetizing the federal debt issued by the Treasury, which is what the U.S. central bank calls “quantitative easing.” Americans continue to believe — and hope — that the Fed can save us from our collective idiocy when it comes to debt, both public and private. While there are growing signs that the Fed’s zero interest rate policy, or “ZIRP,” is greatly damaging individuals and financial institutions alike, we also need to question whether the Fed can let rates rise without provoking another financial assets collapse. In effect, the Fed and other global central banks are all caught in a “Catch-22? situation, to borrow the phrase from the 1961 novel by Joseph Heller. The Fed’s aggressive easing of interest rates and purchases of trillions of dollars in Treasury debt and other assets has stabilized and even raised the price of financial assets, but in other respects the Fed’s policy of reflation has failed — especially compared with past interest rate cycles.

Per Chris Whalen, Wells Fargo's CFO Quit Due To An Internal Dispute Over Financial Disclosures

Last week, the CFO of Wells Fargo suddenly resigned for "personal reasons"  and was immediately replaced by CAO Tim Sloan. The departure was promptly buried, and everyone moved on. Not so fast, says Institutional Risk Analytics' Chris Whalen, who speculated that there is much more here than meets the eye. In a report released yesterday, Institutional Risk Analytics notes that "The departure of Atkins, we are led to believe, was not merely the result of personal issues, but reflects an ongoing internal dispute within WFC’s executive suite regarding the bank’s disclosure." As a result of this action, IRR went ahead with the following rating action: "We are downgrading from “Neutral” to “Negative” the outlook for the forward operating results for Wells Fargo & Co. (“WFC”/Q3 2010 Stress Rating: “B”/Outlook: “Negative”). Recent management changes, the poor quality of WFC disclosure and unresolved issues regarding on and off balance sheet exposures to the GSEs and private investors and/or insurers led to this downgrade, as discussed below."

Chris Whalen On The Zombie IPO: Is American International Group the "Blood Doll" of Wall Street?

In this issue of The Institutional Risk Analyst, we return to the zombie dance party to check in on the queen of the prom, American International Group ("AIG"). First a question: Vampires are all the rage now in popular culture, so allow us to offer a macabre metaphor for AIG. Do you know what a "blood doll" is? A girl who craves to be the regular victim of or willing donor to a vampire. But hold that thought.

2011 Year End Gold At $1,630...Sub $1,000... Or Entering A Diamond Top?

With gold poised to close 2010 a hair's breath away from its all time nominal high price, all those who had been calling for a major correction in the gold metal "just around the corner", have been completely discredited. In fact, what may come as a surprise to many, gold is Reuters' best performing asset class of the year, well above the Nasdaq, and nearly doubling the S&P performance YTD. Yet the fact that gold continues to be a risk hedge as we suggested first about 6 months ago, has not deterred the empty chatterboxes from providing empty predictions: ten days ago we provided Doug Kass' prediction that gold is about to tumble. Granted our read of his "analysis" was one that suggest a jump in the price of gold was imminent. Sure enough, gold since then surged by nearly $50. And with global central banks having to beat their heads over the issue so well encapsulated by John Taylor, namely that global assets barely generate enough cash to service global debt, lat alone retire it, the only long-term outcome will be one of continued fiat devaluation and appreciation in hard currencies such as gold and silver (naturally with bouts of marked volatility, where one will be able to BTFD). So where will gold end 2011? Here are some more respected pundits' views on what may happen to gold in the coming year.

Guest Post: The Bennie Who Stole Christmas

Ben Bernanke is a highly educated PhD from Princeton who has never worked a day in the real world since he graduated from college in 1975. His entire life has been spent in the ivory tower of academia surrounded by models and theories that work perfectly in the comfort of his office. After building his reputation as an “expert” on the Great Depression by studying it and reaching the wrong conclusions, he came down from his ivory tower in 2002 to join an organization that has systematically destroyed the value of the US currency, thereby undermining the well being of the once vibrant middle class...If the Grinch had been pimping for a small pack of Grinchsters who impoverished the honest people of Whoville, then the Dr. Seuss poem would have perfectly described Ben Bernanke, the Federal Reserve and the banksters that run the show here in the USA. The actions taken by Ben Bernanke, Alan Greenspan and their brethren on the Federal Reserve over the last quarter century have destroyed the middle class and left senior citizens impoverished, while enriching its Wall Street masters. Now he is stealing Christmas from the hard working middle class of this country.