Update: With everyone suddenly freaking out over whether (and why) Mnuchin really made the kind of "liquidity test" call to bank CEOs that was reserved for the depth of the financial crisis, moments ago Mnuchin himself tweeted out details of his Sunday call (from Cabo), the gist of which is that Mnuchin was checking bank liquidity levels for "loans and other market operations" with the CEOs of the 6 largest banks, and even more importantly, on Monday Mnuchin will hold a call with the President's Working Group on Financial Markets, better known as the Plunge Protection Team.
In other words, what was expected to be a sleepy Monday half-day session, is about to get a lot more violent.
The full text from Mnuchin's statement:
Secretary Mnuchin convened individual calls with the CEOs of the nation's six largest banks
The banks all confirmed ample liquidity is available for lending to consumer and business markets.
Washington — Secretary Mnuchin conducted a series of calls today with the CEOs of the nations six largest banks: Brian Moynihan, Bank of America; Michael Corbat, Citi; David Solomon, Goldman Sachs; Jamie Dimon, JP Morgan Chase, James Gorman, Morgan Stanley; Tim Sloan, Wells Fargo. The CEOs confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations. He also confirmed that they have not experienced any clearance or margin issues and that the markets continue to function properly.
Tomorrow, the Secretary will convene a call with the President's Working Group on financial markets, which he chairs. This includes the Board of Governors of the Federal Reserve System, the Securities and Exchange Commission, and the Commodities Futures Trading Commission. He has also invited the office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation to participate as well. These key regulators will discuss coordination efforts to assure normal market operations.
"We continue to see strong economic growth in the U.S. economy with robust activity from consumers and business," stated Secretary Mnuchin and added "With the govemment shutdown, Treasury will have critical employees to maintain its core operations at Fiscal Services, IRS, and other critical functions within the department."
And the tweet in question:
Today I convened individual calls with the CEOs of the nation's six largest banks. See attached statement. pic.twitter.com/YzuSamMyeT— Steven Mnuchin (@stevenmnuchin1) December 23, 2018
Needless to say, Mnuchin's official statement has just led to a major headache for banks because as CNBC's Scott Wapner correctly notes, banks now have an obligation to publicly report what was discussed on the call with Mnuchin:
Every CEO on those calls has an obligation now to publicly reveal what was specifically discussed with @stevenmnuchin1 and what the context was.— Scott Wapner (@ScottWapnerCNBC) December 23, 2018
Meanwhile, this is what "liquidity confirmed" may look like:
As to whether this will help to stabilize markets, well...
Let's say you were trying to start a financial crisis. A good strategy would be to threaten to fire the Fed chair and then announce that banks aren't worried about liquidity.— Binyamin Appelbaum (@BCAppelbaum) December 23, 2018
NO PROBLEMS HERE. PLENTY OF MONEY IN THE VAULTS.
MNUCHIN: WHAT FIRE? THERE IS NO FIRE!— SPIKED EGGNOG MUGATU (@SuperMugatu) December 23, 2018
MARKETS: ... who said anything about a fire?
MNUCHIN: NO FIRE! DO NOT PANIC!
Which of course, is the whole point: as we have said on various occasions before, the only way for the Fed to not only relent but go "all in" dovish, perhaps with QE4 on top, is by crashing the market first.
Trump finally figured out that the only way to get QE4 and new all time highs is with a market crash— zerohedge (@zerohedge) December 23, 2018
* * *
Having quickly tried to stymie any panic yesterday about rumors that Trump wants to fire Jay Powell:
"I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so."
Treasury Secretary Mnuchin reported ly interrupted his time in Cabo San Lucas, Mexico, to call the chief executives of some of the country's largest banks in an effort to calm any further collapse in the market when Wall Street opens Monday.
"It's being pre-emptive," a person familiar with the matter told CNN.
"It's sending the proper message to the market so they can calculate the real picture into their Monday opening. They don't have to wait until something happens to be reassured."
We suspect Mr. Mnuchin is calling the wrong guys - does he not think they have been pulling every lever to try and stop the utter carnage in their own stock prices (which are down 12 of the last 13 days in the biggest crash since Aug 2011's USA downgrade)...
In his conversations with executives, CNN reports that the person said, Mnuchin sought to convey the strength of the US economy despite recent market turbulence.
"The market volatility is not changing the strong fundamentals of the economy," said the person.
"Systems remain normal."
If systems remain normal, why are the stocks of the world's largest and most systemic financial companies also collapsing?
And if systems are normal, why is the Treasury Secretary interrupting his Mexican riviera time with Mrs. Mnuchin to beg the banks to do something?
Given the drop in USDJPY early indications already, we suspect Sunday night futures may not obey the Treasury Secretary's wishes.