Despite President Donald Trump’s repeated assertions that he might support breaking up big banks, Wall Street isn’t worried. Yet. The calm is fueled by signals from administration aides in private meetings with industry executives to discuss rolling back financial rules, a Trump priority. While not making any assurances, the officials aren’t harping on the issue, according to people who have participated in or been briefed on the discussions. In fact, the topic of reviving Glass-Steagall, the 1933 law separating investment and commercial banking, rarely comes up. Just last month, Trump’s top economic adviser Gary Cohn eased the concerns of at least two bank chief executives officers who called him after he spoke approvingly of Glass-Steagall in a meeting with senators, people familiar with the matter said. Neither Cohn nor the Treasury Department’s Craig Phillips made a case for splitting up banks when they met recently with an important financial lobbying group, said some attendees. There is also a sense in the industry that lawmakers have little appetite to take on another controversial legislative fight, especially one that would anger big donors. Republicans, who control both houses of Congress, are particularly loath to support such a dramatic reshaping of the banking system.
President Trump, as part of his ‘America First’ program, has proposed lowering the US corporate tax rate to 15 percent and to close a myriad of loopholes in an effort to simplify the tax code, and to also encourage the nation’s largest businesses to bring production back home. The proposal represents a tangible shift in the relationship between Washington and big business. In 2014, President Obama’s Treasury Department introduced new measures to crack down on corporate tax inversions, a strategy companies utilized to exploit gaping tax differentials between the United States and other countries. Burger King’s acquisition of Canada’s Tim Hortons, a coffee and doughnut chain, for example, was motivated in large part by Canada’s more hospitable tax environment.
Two days after democratic senators Elizabeth Warren and Tammy Baldwin sent a letter to Goldman CEO Lloyd Blankfein, asking if Goldman effectively runs the country through its extensive alumni links at the Trump administration, and requesting details on “lobbying” activities in the bank related to review of the Dodd-Frank Act and the Obama-era fiduciary rule on financial advice, as well as asking for any communication between the bank’s employees and Cohn, Mnuchin, nominee for the SEC chair Jay Clayton and chief strategist Steve Bannon, Bloomberg reported overnight that yet another Goldman banker, Jim Donovan, was under consideration for the No. 2 job at the Treasury Department, however it appears he has “got one big thing working against him.” That “thing” is the overdue realization by the new president that his cabinet openly appears to have been created and staffed by populism arch nemesis #1, Goldman Sachs. Besides Steven Mnuchin, Trump’s pick for Treasury Secretary, former Goldman officials working for the new administration include former president Gary Cohn, now director of the National Economic Council; Stephen Bannon, the chief White House strategist; and Dina Powell, formerly the bank’s head of philanthropic investment, who’s an assistant to the president and senior counselor for economic initiatives. So just like Goldman would staff every central bank’s core positions prior to Trump, after the US election, the world’s most influential investment bank has shifted all of its attention on just one person, and he is finally starting to realize that that may not be a good thing.
This post was published at Zero Hedge on Feb 12, 2017.
The Treasury Department’s updated official custody figures show us nothing unexpected. As usual, the TIC numbers are useful more so in corroboration of what contemporary analysis had already described. In the case of March 2016, we find just the sort of apparent reduction in ‘dollar’ pressure that matches observation of general global conditions after February. Total net ‘flow’ was $64.7 billion, up from $28.9 billion in February and -$33.4 billion in January. That is consistent with an end to general global liquidation via the eurodollar system at and around February 11. Improvement is, of course, a relative description which in this context only suggests absence of further liquidity pressure rather than an actual rebound. On the official side, despite a seemingly much more placid funding environment, ‘selling UST’s’ continued in March if at a reduced pace. The net change in official holdings of treasury securities was -$18.3 billion, better than the -$40.2 billion in February and -$56.3 billion in January but not fundamentally different. The official sector has been net negative in UST’s for ten consecutive months and 15 out of the past 16 under the ‘rising dollar.’ Collectively it suggests that though the liquidations ended, the ‘rising dollar’, really the manifestation of the heightened decay in the global eurodollar system, did not. We can further observe that process throughout the rest of the TIC data. Starting with reported bank dollar liabilities, for Q1 as a whole the decline was only $26.8 billion as compared to -$66.1 billion in Q4. As usual, the relevant figure for global funding disorder is the quarter before, meaning the lower pace of reduction in Q1 suggests the general calmness of Q2 so far (whereas the much heavier retreat in Q4 2015 prefigured what we observed in January and early February).
Central banks are dumping America’s debt at a record pace. China, Russia and Brazil sold off U. S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U. S. Treasury bonds in March. In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January. So far this year, the global bank debt dump has reached $123 billion. It’s the fastest pace for a U. S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon.
More than a quarter of a million active and retired truckers and their families could soon see their pension benefits severely cut – even though their pension fund is still years away from running out of money. Within the next few weeks, the Treasury Department is expected to announce a crucial decision on whether it will approve reductions to one of the country’s largest multi-employer pension plans. The potential cuts are possible under legislation passed by Congressin 2014 that for the first time allowed financially distressed multi-employer plans to reduce benefits for retirees if it would improve the solvency of the fund. The law weakened federal protections that for more than 40 years shielded one of the last remaining pillars that workers could rely on for financial security in retirement. For many workers, the promise of a guaranteed income stream for life – a benefit now nearly extinct for younger generations – was at times strong enough to convince them to sacrifice pay raises or other job opportunities. But after decades of challenges that left many pension funds in tough financial straits, some people are learning in retirement that the promises made to them may have to be broken. The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York and Minnesota, was the first plan to apply for reductions under the new law.
Yesterday Senators Elizabeth Warren and Sherrod Brown sent a letter to U. S. Treasury Secretary Jack Lew, asking him to investigate potential U. S. involvement in the money laundering issues recently exposed by the leak of the Panama papers from the law firm, Mossack Fonseca. The Senators told Lew: ‘The Justice Department is reportedly reviewing this matter to determine whether there may be ‘high-level, foreign corruption that might have a link to the United States or the U. S. financial system.’ But, as the primary agency charged with protecting the integrity of the U. S. financial system and enforcing our laws against money laundering and terrorist financing, we strongly urge the Treasury Department to conduct its own inquiry into Mossack Fonseca’s activities and its clients.’ According to journalists who have seen the documents that were leaked by an unknown source, there were 617 ‘banks, law firms, accountants, company incorporators and other middlemen’ operating in the United States that are implicated by the document leak in terms of helping clients conceal their assets. Unfortunately, Senators Warren and Brown appear to have short memories. Otherwise, U. S. Treasury Secretary Jack Lew would be the last person that comes to mind to conduct an investigation to protect ‘the integrity of the U. S. financial system.’ How Lew was confirmed by the U. S. Senate for U. S. Treasury Secretary remains an open mystery at Wall Street On Parade. Lew had previously worked as an executive for the very division of Citigroup that blew up the bank during the 2008 financial crisis and cost taxpayers the largest bank bailout in U. S. history. When Lew left his executive position at Citigroup at the end of 2008 and joined Hillary Clinton’s State Department as Deputy Secretary of State, he retained an investment in Citigroup Venture Capital International (CVCI), a $7 billion private equity fund which was housed in the Cayman Islands at the infamous Ugland House. According to a previous Government Accountability Office (GAO) report, Ugland House is home to 18,857 corporations. In 2009, President Obama called it either ‘the largest building in the world or the largest tax scam in the world.’
Republican presidential frontrunner Donald Trump’s wide-ranging interviewwith the Washington Post’s Bob Woodward and Robert Costa, published Saturday, made news on many different fronts. From his prediction of a ‘very massive recession’ to his description of himself as the ‘Lone Ranger’ of American politics trump was, even for him, highly quotable. But for people focused on fiscal issues, it was his claim that he would eliminate the federal debt – not the annual deficit, but the entire outstanding debt of the federal government – within eight years that really raised some eyebrows. The Treasury Department calculates the nation’s federal debt at $19.3 trillion, although it could be as low as $13.9 trillion (if you eliminate debts the government owes itself, like Treasury securities held by the Social Security Trust Fund). Trump, however, consistently describes the debt as being more than $19 trillion, so when he promises to eliminate the debt within eight years, it’s reasonable to assume that he is referring to the higher figure, which will be approaching $20 trillion by the time the next president takes office. The reaction most people familiar with government spending and borrowing had to Trump’s promise was that it is utterly delusional.
America’s debt is getting dumped left and right as the global slowdown worsens. Countries around the world are selling their U. S. government debt holdings this year by the largest amounts seen since at least 2000. China has been selling U. S. debt but it’s not alone. Lots of emerging markets like Brazil, India and Mexico are also selling U. S. Treasuries. Not that long ago all these countries were all huge buyers of U. S. debt, which is viewed as one of the safest places to park money. ‘Five or six years ago, the big concern was that China was going to own the United States,’ says Gus Faucher, senior economist at PNC Bank. ‘Now the concern is that China is selling them.’ Foreign governments have sold more U. S. Treasury bonds than they’ve bought in the 10 consecutive months through July 2015, the most recent month of available data from the Treasury Department. Just in the first seven months of the year, foreign governments sold off $103 billion of U. S. debt, according to CNNMoney’s analysis of Treasury Department data. Last year there was an overall increase of nearly $45 billion.
Wei Lili is running out of investment options. Apartment prices in her city of Wuhan are beyond her reach even after a recent property slump, and the volatileSTOCK MARKET is too great a risk. ‘It takes more than a million yuan to buy a flat, and stocks are like a roller coaster – they are too soul-wrenching for me,’ said Wei, 52, a government worker in the central Chinese city. She’s lost almost half of a 30,000 yuan ($4,800) investment in stocks, she said, declining to elaborate. The party may be ending for Chinese investors who have seen housing prices boom over most of the past decade and gained from wagers on everything from surging commodity prices to industrial-company loans. WithTHE STOCK MARKET in a funk, lackluster prospects for an oversupplied housing market and interest rates falling, savers like Wei face a new era of lower investment returns should the recent equities rout persist. While investors have a few more instruments to turn to than before – wealth management products and investment trusts have seen assets soar in recent years – their returns also are under pressure. That could increase the incentive to hunt for better yields overseas or in questionable fads like the bubbles in garlic and fine Pu’er tea in the past decade. ‘Chinese investors are in for a tough stretch,’ said Andrew Polk, a Beijing-based economist at the Conference Board who previously worked at the U. S. Treasury Department. ‘We are likely to see an even greater increase in capital outflows going forward and we might see some very random asset bubbles, like the ‘great garlic bubble’ in late 2009.’
‘Thou shalt not steal.’ This long-standing commandment is merely a meddlesome detail, apparently, as the Vatican and the US government are teaming up to extort Americans of their hard-earned money. The US government and the Vatican make great bedfellows, considering each has a long history of corruption and violence. As of last week, the Vatican has signed on to FATCA officially, but last December the Holy See came to agreement on most of what would become an Intergovernmental Agreement to hand over American account information. The Treasury Department has paraded the Vatican deal around, as the ecclesiastical jurisdiction of the Catholic Church is a shining example of fiduciary responsibility and morality, considering the Vatican Bank’s corruption in the past. The Vatican bank has been the one of, if not the most, secretive banks in the world. In 2012 even Italian prosecutors detained the Vatican bank’s former head. This was just one in a line of scandals for the officially called ‘Institute for Works of Religion (IOR).’ Even JP Morgan apparently shut down the account of the Vatican bank due to concerns over transparency. Pope Francis has said he has had an eye on reforming the Vatican Bank, but the pope likely doesn’t have that much power over the financial institution. FATCA is now in effect and offers an opportunity for the Vatican Bank to make strategic partnerships so that it can continue to operate. After all, most wire transfers go through New York, which means the Vatican, if it did not fall in line with the US government, could see its funds held up or even diverted.
It’s tough to keep up with the conspiracy theories that run rampant from day to day in the hallowed halls of Congress. But one that is gaining traction is that the U. S. Treasury Department’s Financial Stability Oversight Council (whose acronym is pronounced F-SOC) is the handmaiden of an international finance cabal and is obediently marching to its beat instead of the mandates of Congress. These suspicions were on display at the Senate Banking Committee hearing last Wednesday and the House Financial Services Committee hearing the week before where U. S. Treasury Secretary Jack Lew, who Chairs F-SOC, was pummeled with thinly veiled, and not so thinly veiled, accusations. F-SOC was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. It is charged with the early identification of emerging risks to the financial system. Every major regulator of Wall Street banks has a seat.
Washington’s untruths about the Troubled Asset Relief Program (TARP)’s so-called ‘success’ add up to something worse than the original taxpayer bailouts of big banks and other corporations, according to David Stockman, White House budget chief during the Regan administration. He noted the Treasury Department recently concluded that the 2008 TARP had actually returned a profit of $15.3 billion, returning $441.7 billion on the $426.4 in taxpayer monies invested to save the likes of Citigroup, Bank of America, General Motors, American International Group (AIG) and other pre-meltdown spendthrifts. ‘The ‘small profit’, along with most of the so-called ‘recovery’ of Uncle Sam’s $426 billion initial investment, was ground out of the backs of America’s savers and depositors; or it was scalped from the massive financial bubbles the Fed has generated in the Wall Street casino,’ Stockman wrote on his Contra Corner blog. ‘In short, under an honest monetary regime of market clearing interest rates, bank balance sheets would be far smaller. Likewise, deposit costs would be far higher, and opportunities to scalp profits from the global scramble for yield far less abundant.’