Banks Make Billions Printing/Lending Money When They Don’t Have To Worry About Being Paid Back!
Imagine a bank creating unlimited funds to lend, earning billions in fees and interest, with no worries about the borrower defaulting. It’s happening today – big time!
This week’s reading stack began with a Wolf Street article, “Deep-Junk-Rated Carvana gets $4.5 Billion from New Investors, after Shares Collapsed by 79%….”.
Despite regularly losing money and a deep junk bond rating, they managed to raise $4.5 billion through stock and bond offerings. Moody’s downgraded Carvana’s credit rating. Wolf Street explains:
“What Moody’s is saying is that despite large leverage, persistent losses, and persistent negative cashflows, Carvana has been able to bamboozle public markets into forking over more money to keep it afloat, and that ability to extract money from new investors to pay off existing investors is why the outlook is “stable” after today’s downgrade.”
The big banks are co-conspirators. Why?
Wolf Street answers:
“After the junk-bond offering (Carvana) will have more debt….
But for now, no problem: Investors are still chasing yield and they’re still buying the dips, and they’re still smelling an opportunity to sell those shares to the greater fool, hoping that the world hasn’t run out of greater fools yet.”
The Casino Banks will peddle their stocks and bundle their debt into high yield, fee-based mutual funds, telling the market they are safe, not to worry – passing the credit risk to a greater fool.
My reading stack didn’t let me down. The Carvana situation is a pimple on a gnat’s behind when you look at the big picture. This Wall Street on Parade (WSOP) article tells us:
“…. Over time, the Fed has also been granted a supervisory role by Congress over Wall Street’s megabanks alongside its ability to bail them out when its crony brand of supervision fails. There was an epic failure in the Fed’s supervision of the Wall Street megabanks in the leadup to the 2008 financial crash and the September 2019 repo blowup. In both cases, the Fed made trillions of dollars in cumulative loans at below-market interest rates to the trading units of these megabanks in order to resuscitate them and cover up its own failure to properly supervise the banks.
The convulsions the stock market (recently) experienced…that investors will continue to witness in the days ahead, are inextricably tied to the failure of Congress to strip the Fed of a supervisory role over these global megabanks.
There is no better snapshot of the Fed’s failure as a banking supervisor than this…the Office of the Comptroller of the Currency’s Report on Bank Trading and Derivative Activities. Table 14…that the 25 largest bank holding companies in the U.S. are sitting on $234 trillion notional (face amount) in derivatives but just five bank holding companies are responsible for $200.18 trillion of that exposure or 86 percent of the total. Those mega bank holding companies are: JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America.
The table clearly shows that the most dangerous form of these derivatives – the same credit derivatives that blew up Wall Street in 2008 – are also concentrated at those same five bank holding companies.”
Kudos to Pam and Russ Martins for their investigative reporting. They have provided us with tons of data, and many sad stories about being stonewalled, as the Fed refuses to comply with Freedom Of Information Act (FOIA) requests for information.
These banking holding companies are also the owners of the Fed. They are hiding the information from the public and Congress, while receiving trillions in bailout dollars, causing inflation to skyrocket.
How do investors protect the value of their nest egg?
How do retirees pay their skyrocketing living costs?
Luckily there’s a proven way for you to stay ahead of inflation, just like 20,000+ investors are doing right now…
Here’s how you can be one of them. Click HERE for more information.
“…. The Federal Reserve released the names of the banks that had received $4.5 trillion in cumulative loans in the last quarter of 2019 under its emergency repo loan operations for a liquidity crisis that has yet to be credibly explained. Among the largest borrowers were JPMorgan Chase, Goldman Sachs and Citigroup, three of the Wall Street banks that were at the center of the subprime and derivatives crisis in 2008 that brought down the U.S. economy. That’s blockbuster news. …. Not one major business media outlet has reported the details of the Fed’s big reveal.
…. On October 24, 2019, we reported the following:
“The New York Fed will now be lavishing up to $120 billion a day in cheap overnight loans to Wall Street securities trading firms…. In addition, it is increasing its 14-day term loans to Wall Street…. Those term loans…have been occurring twice a week,…bringing the total weekly offering to an astounding $690 billion.
…. If the same Wall Street firms are getting these loans continuously rolled over, they are effectively permanent loans. (That’s exactly what happened during the 2007-2010 Wall Street collapse: some teetering Wall Street casinos received, individually, $2 trillion in cumulative loans that were rolled over for two and one-half years – without the authorization or even awareness of Congress or the American people. One bank, Citigroup, received over $2.5 trillion in Fed loans, much of them at an interest rate below 1 percent, at a time when it was insolvent and couldn’t have obtained loans in the open market at even high double-digit interest rates.)”
…. Obviously, the banks that were borrowing the largest sums on a perpetual basis from the Fed were the “chronically illiquid.” JPMorgan Chase and Citigroup’s Citibank are among the largest deposit-taking, federally insured banks in the U.S. Americans have an urgent need to know why they needed to borrow from the Fed on an emergency basis in the fall of 2019.
Theories abound…(about) why this story is off limits to the media. One theory goes like this: the Fed has made headlines around the world in recent months over its own trading scandal – the worst in its history. Granular details of just how deep this Fed trading scandal goes have also been withheld from the public as well as members of Congress.
If the media were now to focus on yet another scandal at the Fed… – there might be legislation introduced in Congress to strip the Fed of its supervisory role over the megabanks and a restoration of the Glass-Steagall Act to separate the federally insured commercial banks from the trading casinos on Wall Street.”
It came together for me in this report:
|“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…. will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered….
The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
— Thomas Jefferson
“As long-term readers of ‘Wall Street On Parade’ know, we have regularly warned that the failure of Congress to meaningfully reform Wall Street by restoring the Glass-Steagall Act poses a national security threat to our nation in times of crisis.
…. The Fed’s balance sheet has ballooned from less than $1 trillion before the financial crisis in 2008 to $9 trillion today as a result of its willingness to perpetually bail out Wall Street. American taxpayers are on the hook for 98 percent of the Fed’s balance sheet and thus have a critical interest in demanding both transparency and accountability from the Fed.”
This is a cruel joke! The Federal Reserve, a group of unelected people, operating in secrecy, put the American Taxpayers on the hook for trillions, while their owners make billions in profits & bonuses. They lend money to anyone, anywhere, without worry about default. When they win, they keep the profits, when the lose taxpayers bear the loss.
WSOP educates us on the nominees for a new Fed Regulator. The first nominee, Sarah Bloom Raskin withdrew her name because Wall Street fears she might actually do her job.
WSOP tells us about current nominee, Michael Barr. He was instrumental in getting Glass-Steagall repealed. He also worked for Obama’s treasury secretary, Tim Geithner. They quote David Dayen:
“Michael Barr was Tim Geithner’s right hand during the Dodd-Frank process, and several staffers involved in the legislation have told me that he was more of a hatchet man who was instrumental in weakening the reform and untruthful along the way.”
They quote Jeff Hauser, Executive Director of the Revolving Door Project:
“Barr…is still part of a network of advisors to NYCA Partners, a venture capital fund that brings Wall Street and Silicon Valley together to carve up Americans’ finances via regulation-dodging fintech apps.
He once sat on the Board of…a think tank which has called for throwing out almost everything which keeps our financial regulatory system accountable to the public, such as FOIA law and public comment period….”
The nominee for Fed regulator got Glass-Steagall repealed, made sure Dodd-Frank was a terrible disaster and believes financial regulation should NOT be accountable to the public – and lies along the way. No wonder the public doesn’t trust Congress or the bankers!
The American people are “The Greater Fool”. What happens when the Carvana’s and others with trillions in debt comes due? The Fed will either use taxpayer money to “extend and pretend” or there will be massive defaults all over the world. If they pour in more money, expect the dollar to eventually collapse. It’s a Monopoly game where the banker wins every time.
Americans are fed up, and prices are skyrocketing. Unless Congress gets a real wakeup call, many pundits predict complete economic collapse. A lot of people belong in jail….
A little help means a lot!
Seven years ago, I vowed to keep our newsletter FREE! I plan to keep my promise.
It’s an expensive, time-consuming hobby, but also a labor of love.
Recently a reader asked why I didn’t charge for our weekly letter. I explained that I want it available for everyone. Some readers may be on limited budgets and may benefit the most from our advice.
He pressed on with his questions. How much does your letter cost? How many readers do you have? He concluded, “If each reader paid $10/year, you would be fine.
I responded, “Yes, $10 per reader would work, BUT I am committed to keeping it FREE even if it costs me money.”
Several readers suggested we add a donations button to help us offset the cost of our publication. It helps when people pitch in and we certainly appreciate it.
If readers want to donate, it sure helps out, however, it’s strictly voluntary – no pressure – no hassle!
Click the DONATE button below if you’d like to help.
You do not have to sign up for PayPal to use your credit card.
And thank you all!
On The Lighter Side
I watched the Cubs play on TV the first week of May. Usually, by now, there are real green sprouts appearing on the outfield wall, but not this year. Much of that part of the country has had challenging weather, lots of rain and many ballgames cancelled.
Our stadium here in AZ is covered, which sure makes planning much easier. The Cubs played in Milwaukee with their dome and rain was pouring through a leak in the roof on to the outfield. Finding and fixing a leak in that roof would be quite a challenge.
Our AZ weather is getting warmer, cactus flowers blooming everywhere. Won’t be too much longer and I’ll be complaining about the heat.
Quote Of The Week
Earlier this month I turned 82. I caught a line from a Garth Books song that hits home. I’ll confess, with all the free time I have had with medical issues, I’d have to list “daydreaming” as one of my hobbies. I wouldn’t call it trying to relive my life, but more thinking about friends past, hoping they had a good life, and wonder if they too are sitting comfortably doing the same.
“I walked down to the park last night
Warm breeze stirring up a soft moonlight
And my mind started drifting to way back when
Yes, I do think about you
Every now and then….”
— Garth Brooks – Every Now And Then
Jo’s childhood friend, Fred M. is one of the funniest men I have ever met. He proves it to us most every day on Facebook. He may be a bit irreverent at time, but you still chuckle. We will let one of his posts provide for this week’s chuckle…
Until next time…
“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken
Affiliate Link Disclosure – This post contains affiliate links. If you make a purchase after clicking these links, we will earn a commission that goes to help keep Miller on the Money running. Thank you for your support!