Last week, Pres. Donald Trump nominated Marvin Goodfriend to fill a vacancy on the Federal Reserve Board of Governors. When we reported the news, we called him ‘another swamp creature’ – a member of the Washington D. C./Wall Street clan Trump promised to drain away. We’re not alone in our thinking. In an article on the Mises Wire, Tho Bishop called Goodfriend’s nomination ‘a dangerous act of outright betrayal to Trump’s core constituency of working-class voters.’ It’s true Goodfriend’s views on monetary policy don’t fit in with the current Fed status quo. But that’s not a good thing. Goodfriend isn’t a fan of the conventional radical policy of quantitative easing. He’s actually a proponent of an even more radical policy. Following is Bishop’s analysis in its entirety. Donald Trump nominated Marvin Goodfriend to the Federal Reserve Board of Governors, one of the numerous vacancies that have emerged over the course of the past year. While his prior nominations of Jay Powell as Chairman and Randal Quarles as Vice Chair represented a disappointing commitment to the status quo, his selection of Goodfriend is a dangerous act of outright betrayal to Trump’s core constituency of working class voters. The timing of the decision is ironic. After all, while Trump is busy lobbying Senate Republicans to support his desired tax cuts, he has decided to nominate a would-be central banker who wants to effectively tax the bank accounts of American citizens.
This post was published at Schiffgold on DECEMBER 5, 2017.
Markets are blowing off this uncertainty for now. On Thursday, the Senate confirmed Randal Quarles, President Trump’s first Fed nominee, as a member of the Federal Reserve Board of Governors. During his confirmation hearing, Quarles said it was time to roll back some of the regulations that were imposed on banks after they’d imploded and threatened to take down the global financial system. He will become the chief bank regulator at the Fed, filling the slot that Daniel Tarullo left behind when he resigned unexpectedly in April. Quarles is founder of private investment firm, The Cynosure Group. Fed Governor Jerome Powell is also a Cynosure alumnus. Quarles had been a partner at private equity firm The Carlyle Group and served as undersecretary of the Treasury under President George W. Bush. WHIRRRR makes the revolving door. One down, four more to go. The Fed’s Board of Governors has seven slots, currently chaired by Janet Yellen. After Quarles’ appointment, potentially four more will need to be filled over the next few months. The seven board members are part of the policy-setting 12-member Federal Open Markets Committee. The other five members of the FOMC are the president of the New York Fed and on a one-year rotating basis four presidents of the remaining 11 regional Federal Reserve Banks.
This is the begging-for-the-overthrow-of-a-corrupt-status-quo economy we have thanks to the Federal Reserve giving the J. P. Morgans and Jamie Dimons of the world the means to skim and scam the bottom 95%. Dear Jamie Dimon: quick quiz: which words/phrases are associated with you and your employer, J. P. Morgan? Looting, pillage, rapacious, exploitive, only saved from collapse by massive intervention by the Federal Reserve, the source of rising wealth inequality, crony capitalism, privatized profits-socialized losses, low interest rates = gift from savers to banks, bloviating overpaid C. E. O., propaganda favoring the financial elite, tool of the top .01%, destroyer of democracy, financial fraud goes unpunished, free money for financiers, debt-serfdom, produces nothing of value to society or the bottom 99.5%. Jamie, if you answered “all of them,” you’re correct. The only reason you have a soapbox from which you can bloviate is the central bank (Federal Reserve) saved you and your neofeudal looting machine (bank) from well-deserved oblivion in 2008-09, and the unprecedented, co-ordinated campaign by global central banks to buy trillions of dollars of bonds and stocks.
Apparently the Banks have been lobbying heavily, and expending significant amounts of money again, leaning on their Congressmen and pressuring regulators, saying that their capital standards need to be relaxed so that they can make more loans to stimulate economic growth. But that, according to the FDIC Vice-Chairman, is utter nonsense. “Hoenig, who was a high-ranking Federal Reserve official during the crisis, cautioned Senate Banking Committee Chairman Mike Crapo and the committee’s senior Democrat, Sherrod Brown, “against relaxing current capital requirements and allowing the largest banks to increase their already highly leveraged positions.” Using public data to analyze the 10 largest bank holding companies, Hoenig found they will distribute more than 100 percent of the current year’s earnings to investors, which could have supported to $537 billion in new loans.
On Wednesday, Janet Yellen testified before the House Financial Services Committee. Though the hearings lost much of their appeal when Dr. Ron Paul retired from Congress, the House Republicans have maintained a reputation for being far more hostile to the Federal Reserve than their colleagues in the Senate – managing to generate some worthwhile moments. While little news was made, with Yellen maintaining her support for generally low interest rates, there were some points made today worth noting. 1) Republicans Continue to Push on the Fed’s Subsidy to Wall Street Starting in 2008, the Federal Reserve has paid interest on excess reserves parked at the Fed. While this had never been done prior to the financial crisis, this policy has now become a vital tool for the Fed in setting short-term interest rates. As the Fed has increased the Federal funds rate, so too has it increased its ‘Interest On Excess Reserves’ (IOER), now paying 1.25% on the over 2 trillion banks hold at the Fed. This policy has drawn increasing criticism from House Republicans, and Yellen faced criticism from both Committee Chairman Jeb Hensarling and Rep. Andy Barr, who hold Dr. Paul’s old position as chairman of the monetary subcommittee. Accurately, both men highlight that this policy means the Federal Reserve – and by extension the US Treasury that would otherwise receive these interest payments – are directly subsidizing large Wall Street and foreign banks. Considering these IOER payments are projected to be $27 billion this year, it’s good to more attention be brought to this obvious example of Wall Street cronyism.
We have frequently called out the New York Times for running sycophantic articles on the big, mean, untamed Wall Street banking behemoths which just happen to be one of its home town’s largest industries and source of the biggest paychecks, which, in turn, boost its real estate markets, restaurants and retail sales – not to mention its own ad revenues. According to the Federal government’s Bureau of Labor Statistics, financial activities represented 468,600 jobs in New York City as of April 2017. According to a report from the New York State Department of Labor on New York City’s largest industries, as of 2014 the ‘average annual wage ($404,800) paid in the securities and commodity contracts industry is nearly five times the all-industry average annual wage ($84,752) for 2014.’ But today, the New York Times’ Editorial Board has joined Wall Street On Parade in expressing skepticism about the Federal Reserve giving a green light on the stress tests for 34 banks last week. After sounding the alarm about the Trump administration’s plans to roll back Obama-era reforms of Wall Street, the New York Times editorial raises the following concerns: ‘It’s entirely possible that the system is more fragile than the Fed’s stress tests indicate. By the Fed’s calculations, capital held by the nation’s eight largest banks was nearly 14 percent of assets, weighted by risk, at the end of 2016. ‘Alternative calculations of capital, including those that use international accounting rules rather than American accounting principles, put the capital cushion much lower, at 6.3 percent. The difference is largely attributable to regulators’ differing assessment of the risks posed by derivatives, the complex instruments that blew up in the financial crisis and that still are a major part of the holdings of big American banks.
This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission. Bloomberg has nice piece on the battle between JPMorganChase’s Jamie Dimon and the Minneapolis Fed’s Neel Kashkari. (Bloomberg) Jamie Dimon is America’s most famous banker, and Neel Kashkari is its most outspoken bank regulator, so it’s not a shock that they would eventually come to blows. What’s interesting is that their contretemps is over an acronym that most Americans have never heard of, but one that may be central to preventing another recession. TLAC, which is pronounced TEE-lack, is something you need to know about if you want to judge the sparring between Dimon, the well-coiffed chief executive of JPMorgan Chase & Co., and Kashkari, the very bald man who ran for governor of California on the Republican ticket and is now president of the Federal Reserve Bank of Minneapolis. On April 6, Kashkari went after Dimon in a way that circumspect central bankers ordinarily don’t. In an essay published on Medium and republished on the Minneapolis Fed website, he challenged Dimon’s assertion in his annual letter to shareholders that 1) there’s no longer a risk that taxpayers will be stuck with the bill if a big bank fails, and 2) banks have too much capital (meaning an unnecessarily thick safety cushion). Wrote Kashkari: ‘Both of these assertions are demonstrably false.’
The biggest banks on Wall Street, both foreign and domestic, have been repeatedly charged with rigging and colluding in markets from New York to London to Japan. Thus, it is natural to ask, have the big banks formed a cartel to rig the prices of their own stocks? This time last year, Wall Street banks were in a slow, endless bleed. The Federal Reserve had raised interest rates for the first time since the 2008 financial crisis on December 16, 2015 with strong hints that more rate hikes would be coming in 2016. Bank stocks never do well in a rising interest rate environment because their dividend yield has to compete with rising yields on bonds. Money gravitates out of dividend paying stocks into bonds and/or into hard assets like real estate based on the view that it will appreciate from inflationary forces. This is classic market thinking 101. Bizarrely, to explain the current run up in bank stock prices, market pundits are shoving their way onto business news shows to explain to the gullible public that bank stocks like rising interest rates because the banks will be able to charge more on loans. That rationale pales in comparison to the negative impact of outflows from stocks into bonds (if and when interest rates actually do materially rise) and the negative impact of banks taking higher reserves for loan losses because their already shaky loan clients can’t pay loans on time because of rising rates. That is also classic market thinking 101. Big bank stocks also like calm and certainty – as does the stock market in general. At the risk of understatement, since Donald Trump took the Oath of Office on January 20, those qualities don’t readily come to mind in describing the state of the union. Prior to the cravenly corrupt market rigging that led to the epic financial crash in 2008 (we’re talking about the rating agencies being paid by Wall Street to deliver triple-A ratings to junk mortgage securitizations and banks knowingly issuing mortgage pools in which they had inside knowledge that they would fail) the previous episode of that level of corruption occurred in the late 1920s and also led to an epic financial crash in 1929. The U. S. only avoided a Great Depression following 2008 because the Federal Reserve, on its own, secretly funneled $16 trillion in almost zero interest rate loans to Wall Street banks and their foreign cousins. (Because the Fed did this without the knowledge of Congress or the public, this was effectively another form of market rigging. Had the rest of us known this was happening, we also could have made easy bets on the direction of the stock market.)
With the Trump inauguration just over 10 days away, attention has now shifted to what Trump will do the moment he steps foot in the White House, and as The Hill reported this morning, judging by his campaign promises, Donald Trump will be a busy man starting on his first day in the Oval Office: “Trump has pledged to take sweeping, unilateral actions on Jan. 20 to roll back President Obama’s policies and set the course for his administration. Many of Obama’s policies he can reverse with the simple stroke of a pen.” The Hill then lays out some of the key agenda items in terms of Immigration, Environment, Lobbying, Trade and Healthcare. The reality, however, is a bit more nuanced than captured in the report, and has to take into consideration not only what Trump’s intentions are, but how they would integrate with Congress, where simply structural limitations could put hurdles ahead of the Trump agenda. So, for a more comprehensive preview of what Trump can – and can not do – both on day one, and for the rest of 2017, we present a recent analysis by Alec Phillips of Goldman Sachs (which, now that Trump has surrounded himself with Goldman alumni will be as critical when it comes to fiscal policy as Goldman was when it came to advising the Federal Reserve on monetary policy), which notes that the political agenda for 2017 is starting to take shape, with tax reform and Obamacare repeal seemingly at the top of the agenda. Trump will be delighted to know that both items can be passed without Democratic support via the budget reconciliation process.
This post was published at Zero Hedge on Jan 9, 2017.
This week the 115th Congress was sworn in, and there are some indications that Fed reform may be on the agenda. The combination of populist anger fueled by Ron Paul’s Presidential campaigns and the 2008 financial crisis coupled with the repeated failings of the Federal Reserve to meet their projections has created a rare window for monetary policy to be both politically advantageous, as well as so obviously needed that even politicians can see it. The question now is what sort of reform is on the table. Congressional Reforms Last Congressional session saw proposals from both the House and the Senate. From the House we have the FORM Act, which would require the Fed to adopt a monetary policy rule and explain to Congress whenever they deviate from that rule. The FORM Act also calls for an annual GAO audit of the Federal Reserve, doubles the number of times the Fed Chairman testifies before Congress, and makes some other tweaks to the makeup and protocol of the Federal Reserve Board. Since the FORM Act passed the House in 2015, there is a good chance we will see it resurrected in 2017. On the Senate side, Banking Committee Chairman Richard Shelby has pushed for the Financial Regulatory Improvement Act. Not only does it lack a catchy acronym, but its reforms to the Fed are far more modest than the FORM Act. The meat of the bill focuses on changes to the Fed board. The head of the New York Fed would no longer be appointed the banks board of the directors, but would instead be nominated by the President and confirmed by the Senate – just like the Federal Reserve Chairman. It would also grant powers to the Fed’s regional presidents that currently only reside with the board of directors. Though early drafts of the Senate bill called for the Fed to adopt rules-based monetary policy, this ended up being stripped from the final proposal due to Democratic opposition – largely because much of the Hill focus has been on the Taylor rule, which many Fed advocates fear is too restricting.
Former Dallas Federal Reserve Bank President Richard Fisher recently gave a speech identifying the Federal Reserve’s easy money/low interest rate policies as a source of the public anger that propelled Donald Trump into the White House. Mr. Fisher is certainly correct that the Fed’s policies have ‘skewered’ the middle class. However, the problem is not specific Fed policies, but the very system of fiat currency managed by a secretive central bank. Federal Reserve-generated increases in money supply cause economic inequality. This is because, when the Fed acts to increase the money supply, well-to-do investors and other crony capitalists are the first recipients of the new money. These economic elites enjoy an increase in purchasing power before the Fed’s inflationary policies lead to mass price increases. This gives them a boost in their standard of living. By the time the increased money supply trickles down to middle- and working-class Americans, the economy is already beset by inflation. So most average Americans see their standard of living decline as a result of Fed-engendered money supply increases.
At each of these great gates of history, eighty to a hundred years apart, a similar generational drama unfolded. Four archetypes, aligned in the same order – elder Prophet, midlife Nomad, young adult Hero, child Artist – together produced the most enduring legends in our history. Each time the Grey Champion appeared marked the arrival of a moment of ‘darkness, and adversity, and peril,’ the climax of the Fourth Turning of the saeculum. – The Fourth Turning – Strauss & Howe In September 2015 I wrote a five part article called Fourth Turning: Crisis of Trust. In Part 2 of that article I pondered who might emerge as the Grey Champion, leading the country during the second half of this Fourth Turning Crisis. I had the above pictures of Franklin, Lincoln, and FDR, along with a flaming question mark. The question has been answered. Donald J. Trump is the Grey Champion. When I wrote that article, only one GOP debate had taken place. There were eleven more to go. Trump was viewed by the establishment as a joke, ridiculed by the propaganda media, and disdained by the GOP and Democrats. I was still skeptical of his seriousness and desire to go the distance, but I attempted to view his candidacy through the lens of the Fourth Turning. I was convinced the mood of the country turning against the establishment could lead to his elevation to the presidency. I was definitely in the minority at the time: Until three months ago the 2016 presidential election was in control of the establishment. The Party was putting forth their chosen crony capitalist figureheads – Jeb Bush and Hillary Clinton. They are hand-picked known controllable entities who will not upset the existing corrupt system. They are equally acceptable to Goldman Sachs, the Federal Reserve, the military industrial complex, the sickcare industry, mega-corporate America, the moneyed interests, and the never changing government apparatchiks. The one party system is designed to give the appearance of choice, while in reality there is no difference between the policies of the two heads of one party and their candidate products. But now Donald Trump has stormed onto the scene from the reality TV world to tell the establishment – You’re Fired!!!
Trump is keeping his word so far. He has admitted that he was part of the problem paying lobbyists to get preferential treatment. As they say, if you want to catch a thief, you hire a thief. In this case, Trump has really been on the other side and admitted he even paid Hillary to attend his wedding. He has cleaned house, throwing out anyone who has been a lobbyist from his cabinet. Nonetheless, he cannot fire Janet Yellen from the Federal Reserve. I also believe that would be a mistake. She inherited a nightmare and is by no means the origin of the problems.
It’s more than a coincidence that at a time when the two leading candidates for the highest office in the United States are considered untrustworthy by tens of millions of their fellow citizens, the industry that has perpetually attempted to stack the political deck in Washington has also lost the trust of a majority of Americans. This feels to many like having Wall Street’s one percent at the rudder for the past two decades has finally steered the ship of state into a toxic sink hole that is devouring the credibility of the United States at home and abroad. Wall Street’s image has fallen so low that the Federal Reserve Bank of New York is holding an annual ‘Reforming Culture and Behavior in the Financial Services Industry’ conference. That New York Fed President Bill Dudley is heading up this conference shows just how hopelessly lost Wall Street really is. (Dudley is the guy who didn’t see a problem with his wife collecting $190,000 annually from JPMorgan Chase while Dudley supervised the bank. The New York Fed is also the place that allowed JPMorgan CEO Jamie Dimon to continue to sit on its Board as JPMorgan was being investigated by the Fed for losing over $6 billion in depositors’ money in the London Whale derivatives fiasco. And Dudley is also the guy that allowed the firing of one of his own bank examiners, Carmen Segarra, after she filed a negative examination of Goldman Sachs. Segarra filed a Federal lawsuit charging that she was fired in retaliation for refusing to change her examination report. The portrait of the New York Fed as a crony regulator under Dudley was dramatically broadened in 2014 when ProPublica and public radio’s This American Life released internal tape recordings Segarra had made inside the New York Fed showing a lap dog regulator cowering before a powerful Wall Street firm.)
Stewart Dougherty presents the 2nd part of his disembowelment of the Clinton crime machine. The Weiner email bomb dropped in the middle of this. As it turns out, the Weiner lap-top mishap appears to a ‘Black Swan’ of sorts that eluded Hillary’s tentacles of control. In the piece below, Stewart presents useful background knowledge and intellectual tools with which to help you analyze and interpret the next sequence of events before and after the election (assuming the election is not postponed). The information that emerges from the Weiner laptop is going to blow people’s minds – John Titus, Best Evidence Productions, in an upcoming Shadow of Truth Author’s Preface: We are far more interested in markets than politics. To us, free markets represent liberty in motion. But today, politics, and particularly the most corrupt political institution on earth, the Federal Reserve, have markets in a hammer-lock. At this point, we have to understand what is happening in politics in order to understand what is likely to happen in markets. We write a great deal about politics at this critical juncture in order to help you understand markets and achieve the financial freedom you desire and deserve. Regarding the breaking Clinton-scandal developments, we believe that in addition to the 650,000 emails retrieved from the Abedin / Weiner computer which are going to show a level of corruption in this nation never before even imagined let alone proved, the FBI’s decision to re-open the investigation was related to the Bundy acquittals on October 27, 2016. We believe that government officials are looking up the barrel of a full-blown American revolution. Not the shooting kind, but rather something much worse for them: complete moral rejection of government and Establishment corruption by the PRODUCTIVE CLASS in America, which threatens to rapidly spread into and cripple the American economy just ahead of the holiday selling season.
We often criminalize behavior that is normal – Donna Brazile on ABC’s ‘This Week’ in reference to Hillary Clinton giving access to the State Department in exchange for 6-figure donations to the Clinton Foundation. Thank goodness for Wikileaks and the DNC and Podesta email dumps. There’s no question that the mainstream media is colluding with the Clinton Campaign to tip the election in HRC’s favor. For Obama to accuse Trump of ‘whining’ about it is absurd. But, then again, Obama’s speech last week sounded like something out of ’1984′ or Goebbels’s Nazi Party Propaganda playbook. Moreover, Obama’s silence is defeaning with regard to HRC’s overt corruption and criminality per the Podesta emails. As for whether or not the media is rigged, follow the money. According to analysis from the Center For Public Integrity, 430 people who work in journalism have donated almost $400,000 in total to both Presidential candidates. HOWEVER, these 430 journalists have given approximately $375,000 to HRC and roughly $15,000 to Trump. In other words, journalists have given 25x more money to HRC than to Trump. Quite frankly, journalists should be forbidden from contributing to any political campaign – as should Federal Reserve officials, who are also throwing wads of money at HRC.
Fed Governor Lael Brainard has donated to Clinton’s campaign and is widely viewed as a potential Clinton pick for Treasury secretary. Yellen hesitated and then demurred when Representative Scott Garrett of New Jersey asked whether Brainard would have a conflict of interest if she were indeed in talks with Democratic nominee Hillary Clinton’s campaign about a position. The election takes place Nov. 8. ‘I would have to consult my counsel, I’m not aware that that’s a conflict,’ Yellen said in testimony to the House Financial Services Committee in Washington, while rejecting Garrett’s suggestion that the U. S. central bank has a political bias. Source: Fed Politics in Spotlight as Yellen Cornered by Lawmaker | Bloomberg Imagine how higher management would feel about you reacting in the same situation. Goldman has been known to lay off its employees for even donating to the Trump campaign. So a similar situation would be you, an employee of a firm, donating to a political campaign, and later getting a promotion as a result of that donation. Of course, Lael Brainard herself has a long history of working in the executive branch to begin with. She initially served in Bill Clinton’s administration, and was appointed Undersecretary of the Treasury for International Affairs early in Barack Obama’s presidency. In 2014, she was nominated to the Federal Reserve Board of Governers, and it appears the majority of ‘conflicts of interest’ and connections with her past employers were largely ignored during her confirmation.
This post was published at Zero Hedge on Oct 5, 2016.
Even with two years remaining in her term, Federal Reserve Chairwoman Janet Yellen may quit if Donald Trump is elected president, an economist argued on Tuesday. Paul Ashworth, chief U. S. economist at Capital Economics, said in a note to clients that Trump doubled down on criticism of the Fed during his debate with Hillary Clinton. Trump said the U. S. economy is in a ‘big, fat, ugly bubble’ and specifically called out Yellen. ‘And we have a Fed that’s doing political things. This Janet Yellen of the Fed,’ he said. ‘The day Obama goes off, and he leaves, and goes out to the golf course for the rest of his life to play golf, when they raise interest rates, you’re going to see some very bad things happen, because the Fed is not doing their job. The Fed is being more political than Secretary Clinton.’ Ashworth noted that, after the last meeting, Yellen fought back against earlier charges by Trump that the central bank was acting in a politically motivated manner.
Just days after Donald Trump accused the Federal Reserve of playing politics with low interest rates during the first presidential debate, Congressman Scott Garrett challenged Chairman Janet Yellen today on whether Fed officials were guilty of playing politics this campaign season. In particular, Garrett questioned the actions of Fed Governor Lael Brainard who raised eyebrows earlier this year by donating the legal maximum to Hillary Clinton’s campaign. Since the Fed’s decision to maintain low interest rates is widely seen as benefiting Hillary Clinton, and given that Brainard’s actions opened herself up to what Garrett described as ‘the appearance of conflict,’ Garrett asked whether she had recused herself from the FOMC. Yellen responded that Brainard did not, was not asked to, and was not barred from donating to political campaigns according to the Hatch Act. Garrett pushed further. Noting that multiple media outlets have been openly speculating about a potential role for Brainard in a Clinton administration, the congressman asked Yellen whether such a conversation between Brainard and Clinton would be a violation of Fed policy. Yellen responded by saying that while she would need to check with Fed lawyers, she didn’t see any conflict. That’s right, according to Janet Yellen, there is nothing wrong with a sitting Federal Reserve official lobbying a presidential candidate for a future job, even though they have the ability to vote on Fed decisions that can dramatically impact the American economy.
After a fusillade of excoriating and in many ways unprecedented attacks on the Federal Reserve by the Republican presidential candidate, Janet Yellen, the US central bank’s chair, finally hit back. Ms Yellen last Wednesday dismissed as emphatically wrong Donald Trump’s claims that she and her institution were keeping short-term interest rates low at the behest of the Obama administration. ‘Partisan politics play no role in our decisions,’ she declared. Mr Trump is throwing punches at a time when the US central bank is under assault from both sides of the partisan divide, and at a time when polling suggests public confidence in its leadership has declined during a subpar economic recovery. Some experts say the Fed is vulnerable and that the populist attacks could fuel demands by politicians for tighter constraints on its policy freedoms. Mr Trump ‘is tossing a lot of fuel on the fire’, says Sarah Binder, a professor of political science at George Washington University. ‘It intensifies the partisan criticism of the Fed and keeps the Fed in the politicians’ crosshairs.’ Mr Trump’s interventions by no means mark the first time the Fed has been turned into a political punching bag. Previous Fed chairs have been the subject of barbs during presidential campaigns – including in 2011 when Republican candidate Rick Perry accused former Fed chair Ben Bernanke of ‘treasonous’ behaviour by conducting quantitative easing. Past administrations have seen outbreaks of tension with Fed chiefs, including under presidents George HW Bush and Richard Nixon.