New York Fed
"The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."
Tuesday humor struck early, courtesy of Goldman's head of the New York Fed, Bill dudley:
- DUDLEY SAYS FED AT TIMES WAS `TOO OPTIMISTIC' ON FORECASTS
That in itself is not the humor. The humor is, as always the context. Such as this:
- DUDLEY SEES STRONG CASE GROWTH TO PICK UP 'NOTABLY' IN 2014
Now that is funny when one considers the following past headlines...
Recent comments by the Federal Reserve Chairman Ben Bernanke have shocked the world financial markets. Since the first allusion to tapering, volatility has been on the rise across the board (stocks, currencies and bonds). The chaotic reaction by market participants and the corresponding increase in yields now risks destabilizing this very fragile equilibrium. It is yet unclear whether or not the damage control from the other Fed Presidents will put a lid on yields and market volatility, or if the damage to the Fed’s (poorly executed) exit strategy is permanent.
One of the main reasons the entire debt-fueled house of cards propping the western financial system, hasn't collapsed in a smouldering heap so far - a development that has stumped all those who think of the Reinhart-Rogoff sovereign debt matrix as one dimensinal with only debt/GDP as the key variable and completely ignoring the interest rate (manipulated or not) - is that the cash interest payment on the global mountain of debt has been rather tame, courtesy of all developed world central banks going all in with serial, or increasingly more, parallel monetization of debt. However, while the US Treasury has the benefit of the Federal Reserve (and its Primary Dealer tentacles) as a backstopped buyer of all the debt that's fit to print, individual Americans are not as lucky. And as America's massively overindebted student body may be about to find out, there is no surer way to burst a debt bubble than to send its rates soaring. Because unless Congress pulls off a miracle in the next 24 hours and passes legislation that delays an inevitable doubling of rates on the most popular Federal (subsidized) Stafford loans, the interest is set to double from 3.4% to 6.8%.
It's been a long time since Hilsenrath actually reported news instead of serve as a leak dissemination service for the New York Fed. Today was one of those time with news from the WSJ that the Obama administration, and specifically Jack Lew, has begun assembling a short list of candidates for the Federal Reserve chairmanship, in the expectation that Ben Bernanke won't seek reappointment when his second term ends in January. According to Hilsenrath, since the decision on whether the Chairsatan stays or goes is all his, Bernanke may decide to stay for a few more years of QEasing, however he won't: "many of Mr. Bernanke's friends and associates believe he wants to step down when his term expires, after nearly eight years overseeing the central bank's response to the most serious economic downturn since the Great Depression."
The 'Hilsenramp' is here. As US equities look set to test previous all-time highs and important support (100DMA), the mouthpiece of the Fed proved his worth:
*WSJ's HILSENRATH: Analysis: Overlooked 'Dovish' Signals In Bernanke Press Conference
*WSJ's HILSENRATH - Analysis: Markets Might Be Misreading The Fed's Messages
Apparently, everyone messed up - there is nothing but good news for the money-printing-addicts. Hilsenrath's "New York Fed" sources have yet to leak the 2013 year-end price target for the S&P 500 (though we expect that next).
Three years ago we wrote "On The New York Fed's Editorial Influence Over The WSJ" in which we observed, courtesy of declassified documents by the Sigtarp exposing the involvement of then-Goldman and New York Fed director Stephen Friedman in relation to his infamous purchase of Goldman Stock so well memorialized by none other than Jon Hilsenrath (a story which made him a Loeb award finalist when he actually did investigative work instead of merely convey messages from the Fed), just how extensive the relationship between Jon Hilsenrath, the WSJ and the New York Fed was. But instead of regurgitating all the minutae covered in the original post (read it here), we will cut to the chase and present the declassified emails between the WSJ team in April/May 2009, and the NY Fed's Calvin Mitchell, then-EVP of the Communications Group, as well as the Fed's internal involvement of the FRBNY's General Counsel Thomas Baxter. We have highlighted the NY Fed "suggestions" - they are self-explanatory.
S&P Revises U.S. Credit Outlook To "Stable" From Negative
Fed's Bullard Details How QE Can Be Cut
Fed Retreat From Bond Buying Expected By Fourth Quarter - Poll
U.S., Japan Leading Recovery In Major Economies - OECD
With part two of today's Fed-a-palooza due out shortly in the form of the May 1 FOMC meeting minutes, here is an informative recap of the current roster of assorted birds at the FOMC via Bank of America. Of course, since every decision always begins and ends with Ben, and soon his replacement Janet, all of below is largely meaningless.
The last time Hilsenrath was relevant was two weeks ago (in a flashback to those days before QEternity when infinite QE was not assured and Jon's input was actually relevant), when following an article of his, and due to his "proximity" with the New York Fed, many assumed that the Tapering suggested by Hilsenrath was being telegraphed by Bernanke to the market. Turns out it was nothing but yet another baffle with bullshit headfake by a central planning regime that is now merely engaged in observing market responses to indirect stimuli: if reduce monthly flow by $20 billion then X (-1%); if cut QE off entirely then Y (-50%?), and so on. Moments ago the same Hilsenrath just released another piece, which effectively refuted everything his previous piece suggested, and in fact made his position as Fed mouthpiece absolutely irrelevant, courtesy of the following disclosure: "this time, when the Fed shuts off bond buying, it won't be... predictable." He goes so far as to say that the term "tapering" is no longer even applicable! Funny that, considering on May 11, none other than Hilsenrath said: "Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy."
Last week's plunge in wholesale sales (and "completely involuntary" surge in inventories) has Gluskin Sheff's David Rosenberg greatly concerned that current quarter real GDP will be very close to stall speed. However, as he notes, "either Mr. Market has yet to figure this out or simply doesn't care any more because of the well ingrained belief that the 'Fed has my back'." When even the Fed is pimping stocks as cheap, he explains, you know what is dominating the thought process of the central bank's targeting - "they say unemployment rate, but they really mean the S&P 500." The 'wealth effect', however, only benefits a chosen few and as Rosie illustrates, an historically low 52% of American households have any money invested in the stock market (based on a recent Gallup poll) - which merely spurs the 'bulls' to argue that the Fed has to be more aggressive...
Normally the New York Fed would not have to bother itself with such Series 7, 63-registration requiring, "financial advisor"-type things as predicting where the stock market will go, especially when it is its own trading desk that provides the impetus for more than 100% of the current equity rally. However, these are not normal times - they are New Normal. And as a result, Fed economists Fernando Duarte and Carlo Rosa have penned a "research" paper titled "Are Stocks Cheap?" in which they view the same reflexive "evidence" that Ben Bernanke himself used to answer a question during a recent press conference if he would still be buying stocks at record levels, namely the risk premium. This is what the NYFed's economists say on the matter: "We surveyed banks, we combed the academic literature, we asked economists at central banks. It turns out that most of their models predict that we will enjoy historically high excess returns for the S&P 500 for the next five years."
The man who is the chief advisor to the US Treasury on its debt funding and issuance strategy was just promoted to the rank of second most important person at the biggest commercial bank in the US by assets (of which it was $2.5 trillion), and second biggest commercial bank in the world. And soon, Jamie willing, Matt is set for his final promotion, whereby he will run two very different enterprises: JPMorgan Chase and, by indirect implication, United States, Inc.
And that, ladies and gentlemen, is how you take over the world.
In late 2010, in a superficially stunning move, Bank of America was sued by, among many others, the New York Fed over the biggest bogeyman for the bank's balance sheet - its legacy portfolio of super toxic Countrywide mortgages it inherited in the worst M&A deal of all time (its purchase of CFC) and the inheritance of woefully inadequate mortgage issuance standards which ever since then (recall our prediction on this issue) has cost the bank billions in litigiation payments and reserves. Obviously, the Fed had no concerns about collecting the money it itself creates, and it certainly doesn't care about legality and criminal financial impropriety, so why was it among the list of plaintiffs? Simple: as we suggested back then, and as has since been proven correct, it was simply so that Bill Dudley's henchmen have a first row view of everything going on in the putback litigation that has been the primary concern for BofA, but with a few of keeping the damage to a minimum. Sure enough, Ever since then the Fed has done everything in its power to mitigate potential losses to BofA as a result of Agent Orange selling hundreds of billions in biohazardous mortgages to anyone and anything with a pulse. It has gotten so bad that the Fed was last week caught lying under testimony, forcing the Fed to take back testimony in a parallel lawsuit between AIG and BofA, which has also involved the New York Fed, as a indirect guardian of BAC's cash hoard.