“The letter from Senator Warren and her colleagues together with Professor Kane’s testimony are like a fresh breeze and the first glimpse of sunshine after being trapped in an underground tunnel of darkness for six years.” – P Martens & R Martens
Two weeks ago, Paul Krugman used some expensive media real estate to write a propaganda piece on the unsupportable proposition that the Dodd-Frank financial reform legislation passed in 2010 is “a success story” and that its bank wind-down program known as Ordinary Liquidation Authority has put an end to “bailing out the bankers.”
Wall Street On Parade took Krugman to task over this fanciful ode to accomplishments by the President the day after his piece ran in the New York Times’ opinion pages and suggested he do proper research on this subject before opining in the future. That was the morning of August 5.
By late in the afternoon of August 5, Krugman had a reality smack-down on his Dodd-Frank success fairy tale by two Federal regulators. Every major media outlet was running with the news that eleven of the biggest banks in the country, including the mega Wall Street banks, had just had their wind-down plans (known as living wills) rejected by the Federal Reserve and FDIC for not being credible or rational. The eleven banks are: Bank of America, Bank of New York Mellon, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and UBS. Continue reading →
“It’s been four years since the Flash Crash on Wall Street sent stocks into a 900-point bungee jump, wiped out over $200 million of investors’ money by improperly triggering stop-loss orders, and shredded public confidence in stock markets. And still, to this day, the Securities and Exchange Commission does not have a Consolidated Audit Trail (CAT) to properly police who is placing orders, at what time, at what speed, in what securities and in which trading venue.” P & R Martens
Serious observers of Wall Street are increasingly asking this question: could a group of trading venues with giant pools of capital, operating in the dark, using high-speed algorithms and artificial intelligence that has a massive historical database and gets smarter with each micro-second trade — effectively own the stock market. Today, we take a look at the massive trading control exercised by just five Wall Street firms.
JPMorgan Chase, Bank of America and Citigroup jointly control trillions of dollars in commercial bank deposits with thousands of branch bank buildings stretching across the United States scooping up the life savings of everyday Joes who have no clue these are also the Masters of the Universe on Wall Street.
Goldman Sachs and Morgan Stanley also own FDIC insured banks. Goldman Sachs Bank USA, as of March 31, 2014, has $104.7 billion in assets; Morgan Stanley Bank, N.A., as of the same date, has $108.8 billion in assets.
These institutions have access to the Fed’s discount window, super cheap access to capital from FDIC insured deposits and a massive subsidy of their institutions under the too-big-to-fail doctrine. And, they also own outright or jointly a large swath of anything and everything that passes as a trading venue on Wall Street today.
The dark pool known as BIDS Trading, L.P. says it “was designed to bring counterparties together to anonymously trade large blocks of shares.” According to its web site, it is owned by: JPMorgan Chase, Bank of America Merrill Lynch, Citigroup, Goldman Sachs and Morgan Stanley – along with other financial firms. Continue reading →
“The ability to rig markets is always so much easier in the dark. And until Congress brings sunshine into the nether world of Wall Street’s dark pools, public confidence is not coming back any time soon.” ~P & R Martens
In 2008, the sprawling global bank, Citigroup, created under the controversial repeal of the Glass-Steagall Act, blew itself up with toxic debt hidden in the dark in the Cayman Islands in an exotic framework called Structured Investment Vehicles or SIVs. The unwilling taxpayer was forced into servitude to bail out this hubris that had occurred at the hands of captured regulators, infusing $45 billion in equity, over $300 billion in asset guarantees, and $2.5 trillion in below-market loans.
At the time of its implosion, Citigroup had over 2,000 subsidiaries, affiliates or joint ventures, many of which operated in the dark in foreign locales.
Flash forward to today: in March, the Federal Reserve said Citigroup had flunked its stress test and the Fed prevented it from boosting its dividend. (The so-called stress test is how the Fed measures a mega bank’s ability to withstand a major economic upheaval.) In rejecting Citigroup’s capital plan for 2014, the Fed said that Citigroup “reflected a number of deficiencies in its capital planning practices, including in some areas that had been previously identified by supervisors as requiring attention, but for which there was not sufficient improvement. Practices with specific deficiencies included Citigroup’s ability to project revenue and losses under a stressful scenario for material parts of the firm’s global operations.”
Most Americans, and, sadly, members of Congress, believe that Citigroup is the parent of all those branch banks holding FDIC-insured deposits across America and bearing that angelic red halo over the word “Citi.” But Citigroup is far more than that. Continue reading →
“NYU has received withering criticism by both its faculty and the media for turning itself into a corporate model of obscene perks while students suffer under one of the highest rates of tuition in the nation and crushing student debt that has a decidedly unsavory odorto it.” ~P Martens
Eric Cantor’s campaign may have eaten its way through 8,000 of steak dinners but big players on Wall Street are eating crow.
Between 2000 and 2007, Goldman Sachs’ Chairman and CEO, Lloyd Blankfein, personally stuffed $73,500 into the Democratic Senatorial Campaign Committee to help elect Democrats to Federal office. But by 2012, Blankfein had decided that “Every Republican is Crucial” and gave just defeated Virginia Republican and House Majority Leader Eric Cantor’s leadership PAC by the same name $5,000 in 2012 and another $5,000 in 2013. In addition, Blankfein gave the Cantor Victory Fund $10,200 on December 6, 2013 according to receipts at the Federal Election Commission.
In the 2013-2014 election cycle, Goldman Sachs’ employees and/or their family members gave a total of $88,500 to Cantor’s leadership PAC – which sluices money to Republican candidates around the country – and another $16,600 to Cantor’s campaign according to the Center for Responsive Politics.
Cantor’s “Every Republican is Crucial” leadership PAC (which goes by the acronym ERIC PAC) says on its web site that it is “determined to take our country back, House district by House district.” With the House Majority leader now soundly defeated in Tuesday’s primary in Virginia by an upstart economics professor supported by the Tea Party, David Brat, who took 56 percent of the vote and sprinkled his speeches with the phrase “crony capitalism,” Wall Street money may not be able to travel from Gotham across state lines as effectively as it once did. Continue reading →
“It is the BANKS who pick the directors who pick the presidents who dominate the committee which decides to loan money back to the banks at 0% interest. How is this not a MASSIVE conflict of interest?” ~S. Black
Henry Ford once said, “It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
He was right about at least one thing– it’s true that hardly anyone on the planet really understands the monetary system… or the way that central bankers manipulate the entire global economy.
I’ve met some seriously smart people who are very high up in finance. Senior bankers, traders, fund managers, etc. And even -they- don’t really understand it.
Everyone just presumes that there are some really smart guys and gals who make policy decisions from their ivory towers. We’re told that they know what they’re doing, and we’re just all supposed to trust them.
People erroneously believe that it’s somehow controlled by the government… in the US, for example, the President of the United States appoints members of the Federal Reserve Board of Governors.
Right now there are 4 presidentially-appointed Fed governors.
Meanwhile there are 12 Federal Reserve Bank presidents who influence the decisions of the all-powerful Federal Open Market Committee (FOMC). Continue reading →
“The price of gold could easily spring back to the highs we saw in 2011 and 2012 as the paper gold market implodes and the physical gold market becomes the benchmark. It isn’t like China will slow buying either. It needs to continue to transfer its $3.4 trillion of reserves out of fiat currencies and into gold as it attempts to secure global financial hegemony and replace the U.S. dollar with the yuan as the global reserve currency.” ~A. English
Rehypothecation Hits Chinese Commodities
As the charred remains of MF Global were being divided up, Jason Fane learned a hard lesson.
Even if you buy something, that doesn’t mean you necessarily own it.
Thanks to the bizarre intersection of commodities and finance, five gold bars and 15 silver bars underlying eight Comex contracts were suddenly in dispute.
HSBC was holding the gold pending delivery, and the MF Global implosion threw what should have been a simple armored car trip into disarray. HSBC had to sue MF Global’s trustee in the bankruptcy proceedings to figure out who actually owned the gold…
As Fane told Reuters at the time, “These bars are mine. We had a letter from HSBC that they were on the loading dock to be shipped to our warehouse contractor when there was some action taken by a third party to stop or delay shipment.”
All of this is due to the obscure and insane concept of rehypothecation. In its own words, HSBC was “exposed to multiple liabilities with respect to the disposition of the properties.”
Now, in a sane and reasonable world, there should never be any debate about who owns a physical asset. If you own it but cannot get it, that means someone stole it or is committing fraud.
Sadly, sane and reasonable do not apply, especially to the stark differences between physical and paper commodities as collateral.
This was a relatively small blip in the big picture. What is happening right now across the Pacific definitely is not.
Some explanation is probably warranted here, so here is how it works. I’ll use the gold that may or may not be in the possession of the Federal Reserve as the example.
‘[W]hen Huvelle approved the settlement in 2010, she was not aware that there was a whistleblower inside the SEC who, five months later, was going to turn to Senator Chuck Grassley with written claims that this SEC settlement had been procured through untoward cronyism between Citigroup’s lawyers and the head of enforcement at the SEC at the time, Robert Khuzami.” ~Pam Martens
U.S. District Court Judge, Jed Rakoff, of the Southern District of New York
Last week, three Federal appellate judges with lifetime appointments, meaning they will be receiving salary and benefits for as long as they choose on the taxpayer’s dime and then a nice, fat, secure pension also courtesy of the taxpayer, ruled that the very same public that makes their own existence so cushy is not entitled to truth or facts or justice when it comes to Wall Street. Truth, facts, justice are quaint relics of a bygone American past. Today, when it comes to Wall Street, Federal judges are simply there to rubber stamp the settlements of captured regulators and then quickly re-ink the stamp for the next shady settlement.
To fully grasp what happened last week you will first need to purge your mind of everything you think you know about Federal District Court Judge, Jed Rakoff, rejecting a smelly deal fashioned between the Securities and Exchange Commission and Citigroup and getting slapped down by an impartial appeals court for doing so. Other than the fact that Rakoff did reject the deal, you’ve likely been misled on all other facets of the matter.
That’s the world we live in today: corporate-owned media and corporate-owned political appointments are producing corporate-owned reality.
For starters in the SEC v Citigroup case, Rakoff was not a lone voice in the wilderness calling out the SEC for sweetheart pacts with Wall Street that didn’t pass the smell test. Not only did 20 securities law experts around the country file amicus briefs arriving at the same conclusion as Rakoff in the matter (more on that shortly) but more than a year before Rakoff rejected the SEC v Citigroup settlement, Judge Ellen Segal Huvelle on August 16, 2010 in the U.S. District Court in Washington, D.C. rejected another SEC v Citigroup settlement deal that had the stench of cronyism all over it – and still does to this day. Continue reading →
“Citigroup, which became insolvent during the 2008 crisis and required multiple bailouts from the taxpayer, owns a total of four dark pools according to a list posted at the SEC’s web site – none of which the general public has ever heard of: LavaFlow, LIQUIFI, Citi Credit Cross and Citi Cross. (The more dark pools a Wall Street firm owns the greater the concern that it could be trading between these pools to effectively paint the tape, i.e., manipulate the price of a stock.)” P. & R. Martens
June 3 2014 ~ On July 17, 1996, the U.S. Justice Department charged the biggest names on Wall Street, names like Merrill Lynch, JPMorgan and predecessor firms to Citigroup, with pricing fixing on the electronic stock market known as Nasdaq.
The Justice Department felt the firms were so untrustworthy to make a fair electronic marketplace that as part of its settlement it required that some traders’ phone calls be tape recorded when making Nasdaq trades and it gave itself the right to randomly show up and listen in on the traders’ calls. The scandal made headlines for years and revealed that the price fixing had been going on under the unwatchful eye of regulators for more than a decade.
Now, more than six years after the greatest Wall Street crash since 1929, the public is still learning stomach-churning details about the lingering effects of de-regulating Wall Street.
Yesterday we learned that the very same Wall Street firms charged with price fixing in the 90s have somehow conned their regulators into allowing them to own their own dark pools – effectively unregulated stock exchanges – and make markets in the stock of their very own Wall Street bank.
The Financial Industry Regulatory Authority (FINRA) – a self-regulatory Wall Street body (which under a previous name was responsible for missing the Nasdaq price fixing for more than a decade) released trading data yesterday for the dark pools operating the week of May 12 – 16. This was the first time such data has been released. The data releases are set to continue. Continue reading →