Testimony

A warning by the SEC in mid-March 2011 regarding repo-to-maturity trades suggests otherwise.  

Another deal gets dissolved. But threats abound. And it's only going to get worse.

John Taylor, of the Taylor-Rule, who has not been sheepish with his views towards the Fed openly questioned the Fed's independence during a speech to the Joint Economic Committee today. During his testimony at the hearing on the 'Sound Dollar Act of 2012', Taylor noted: "The discretionary interventions of the Federal Reserve have been ratcheted up in such unprecedented ways in recent years that they raise fundamental questions about the future of monetary policy." Perhaps more pointedly, especially given Bernanke's speech today on the Fed's extreme actions and given the hope for a constant interventionist role for the Fed to keep our economy market afloat "The fact that the Fed can, if it chooses, intervene without limit into any credit market - raises more uncertainty, and of course raises questions about why an independent agency of government should have such power."

Following the earlier microphonegate (someone really need to tell politicians that any time they speak, they are now on the record always, and no just for the benefit of the NSA's brand spanking new compound in Utah known as "1984", that includes Portuguese and German politicians too) it was only a matter of time before the more conservative republican elements went beyond the simply rhetorical and asked some pointed questions, such as this from Mike Turner, Chairman of the House Armed Services Subcommittee on Strategic Forces, who minutes ago said that "It’s Unclear What the President has Offered up to the Russians as Bargaining Chips." Additionally, what is funny is that a part of the much hated NDAA which essentially eliminates the bill of rights for American citizens who are suspected of terrorist activity, Congress specifically targeted missile information sharing with Russia. To wit: "Congress has included in the FY 2012 National Defense Authorization Act, Congress, which the president has signed into law, a provision constraining his ability to share classified U.S. missile defense information with the Russian Federation. Congress took this step because it was clear based on official testimony and Administration comments in the press that classified information about U.S. missile defenses, including hit-to-kill technology and velocity at burnout information, may be on the table as negotiating leverage for the president’s reset with Russia." So let's get this straight - Obama signs the NDAA, with supposed reservations because he is well aware it is unconstitutional, and yet when it comes to its plain vanilla provisions, he violates them? Has anyone figured out yet what follows a banana republic in the escalation to pure centrally-planned lunacy, because America is there now.  

Yesterday, Ben Bernanke dedicated his entire first propaganda lecture to college student to the bashing of the gold standard. Of course, he has his prerogatives: he has to validate a crumbling monetary system and the legitimacy of the Fed, first to schoolchildrden and then to soon to be college grads encumbered in massive amounts of non-dischargeable student loans. While it is decidedly arguable that the gold standard may or may not have led to the first Great Depression, there is no debate at all that it was sheer modern monetary insanity and bubble blowing (by the very same professor!) that brought us to the verge of collapse in the Second Great Depression in 2008, which had nothing to do with the gold standard. And as usual there is always an other side to the story. Presenting that here today, is Antal Fekete with "The Gold Problem Revisited."

All you need to read.

Fourteen months, one MF Global carcass and $1.6 billion in "vaporized" funds later, does the CFTC still regulate the futures markets by fax?

Why MF Global might well be the template for future looting.

This week brings policy decisions in Taiwan and Thailand. The CBC decision will be very interesting to watch. The December statement at the time was surprisingly hawkish, only to be followed by a large upside surprise in inflation, and the TWD was subsequently allowed to appreciate. Given that the bank continues to view inflation as a major problem, according to quotes from Reuters, it will be very interesting to see how the bank weighs up concerns about hot money inflows vs the need to contain inflation risks. In particular, in the face of imported inflation pressures via higher commodity prices, many central banks may shift towards accepting the need for more currency strength. The week also brings some important central bank commentary. The RBA governor has an opportunity to opine on the recent slew of weak Australian data, as well as developments in the A$. There is quite a bit of commentary from Fed officials on the docket, including from Bernanke, which we will dissect for information on the further direction of policy. More dovish commentary than that of the FOMC last week, would arguably be a surprise and potentially dampen, if not reverse some of the moves of last week.

This cannot be the right course for us to take in the wake of such a widely recognized crisis. The lack of purposeful outrage is deafening. We cannot restore lasting stability to our economy and society unless we are willing to face up to what we did wrong, right it, and throw out the bums who put us there. Without that, the pattern of ever escalating crisis and interventionist, market-distorting solutions will surely lead to a bigger crisis still ahead... Perhaps the most important symbol of our failure to address reform are the pictures accompanying much of the coverage of Greg Smith’s letter, those of a power-posing Blankfein and Cohn, who without the Government’s accommodation might be striking a very different pose, indeed. You want to sign on to Mr. Smith’s army in joint distaste for Goldman’s lost culture? Please, be my guest. But more deserving of your enmity is the insidious co-option of the core premise of capitalism by a handful of people to ensure the banks’ undeserved survival, and their managers’ really nice lifestyle.

Yet another whistleblower has stepped up, this time one already known to the general public, and one that Zero Hedge covered just over a month ago: we refer to the case of former CBO worker, Lan T. Pham, who, as the WSJ described in early February, "alleges she was terminated [by the CBO] after 2½ months for sharing pessimistic outlooks for the banking and housing sectors in 2010" and who "alleges supervisors stifled opinions that contradicted economic fixes endorsed by some on Wall Street, including research from a Morgan Stanley economist who served as a CBO adviser." As we observed in February, "what is most troubling is if indeed the CBO is nothing but merely another front for Wall Street to work its propaganda magic on the administration. Because at the core of every policy are numbers, usually with dollar signs in front of them, numbers which have to make sense and have to be projected into the future, no matter how grossly laughable the resultant hockeystick." As it turns out, somewhat expectedly, the WSJ version of events was incomplete. There is much more to this very important story, one which has major implications over "impartial" policy decisionmaking, and as a result, Ms. Pham has approached Zero Hedge to share her full story with the public.

Confused why every asset class is up again today (yes, even gold), despite the pundit interpretation by the media of the FOMC statement that the Fed has halted more easing? Simple - as we said yesterday, there is $3.6 trillion more in QE coming. But while we are too humble to take credit for moving something as idiotic as the market, the fact that just today, none other than Goldman Sachs' Jan Hatzius came out, roughly at the same time as its call to buy Russell 2000, and said that the Fed would announce THE NEW QE^TM, as soon as next month, and as late as June. Furthermore, as Goldman has previously explained, sterilization of QE makes absolutely no difference on risk asset behavior, and it is a certainty that the $500-$750 billion in new money (well on its way to fulfilling our expectation of a total $3.6 trillion in more easing to come), in the form of UST and MBS purchases, will blow out all assets across all classes, while impaling the dollar. Which in turn explains all of today's action - dollar down, everything else (including bonds, which Goldman said yesterday to sell which we correctly, at least for now, said was the bottom in rates) up. Finally, as we said, yesterday, "In conclusion we wish to say - thank you Chairman for the firesale in physical precious metals." Because when the market finally understands what is happening, despite all the relentless smoke and mirrors whose only goal is to avoid a surge in crude like a few weeks ago ahead of the presidential election, gold will be far, far higher. Yet for some truly high humor, here is the justification for why the Fed will need to do more QE, even though Goldman itself has been expounding on the improving economy: "The improvement might not last." In other words, unless the "economic improvement" is guaranteed in perpetuity, the Fed will always ease. Thank you central planning - because of you we no longer have to worry about either mean reversion or a business cycle.

As of this morning the Federal Reserve is officially on twitter and can be followed at @federalreserve. This is truly great news as it means that the US debt will have to be limited to at most 140 zeroes! Then again, after yesterday who cares about the Fed?Where is uber-boss Jamie Dimon's twitter account?

I will admit that having written extensively and aggressively about Wall Street’s self-regulator FINRA over the last three years, I did not think there was anything more I could see that would surprise me. Today I am surprised, shocked, and saddened. For those in our nation who have a semblance of decency and a desire to see due process reflected in legal hearings and financial arbitration, I believe you will be similarly dismayed. The case to which I will refer strikes deep into the core of Wall Street arbitration.  I hope you are sitting down and do not have any sharp objects nearby as Dow Jones’ Al Lewis provides a scathing expose of a FINRA arbitration entitled Broker Bankrupted in Kangaroo Court,

Yesterday we presented the view of JPM's Michael Feroli of what today's FOMC statement may say (one word: inflation). Here is what Goldman believes: "Today's FOMC statement should be relatively uneventful. The committee is likely to acknowledge the stronger labor market data and the upward pressure on headline inflation, which will undoubtedly be characterized as temporary. We also expect a softening of the phrase that “[s]trains in global financial markets continue to pose significant downside risks to the economic outlook,” although we do not expect it to disappear entirely. At the meeting, the staff is likely to give a presentation on additional easing options, followed by an extensive committee discussion. (This will not show up in the statement and will only become visible to the outside world when the FOMC minutes are released three weeks later.) We still think that the committee will announce further easing before the end of the second quarter, when Operation Twist concludes. However, our confidence in this view has fallen on net, partly because of the stronger labor market and slightly higher inflation data and partly because Chairman Bernanke chose not to repeat his very dovish comments from the January 25 FOMC press conference at the February 29 Monetary Policy Testimony." Remember: admitting inflation means no QE any time soon (and also admission that all the other central banks have succeeded in staving off deflation for a few more months courtesy of $2.5 trillion in excess liquidity injections in under 2 quarters).