tyb's
Congress Held a Hearing on the Fed’s Bailout of the Repo Market: Here’s Why You Haven’t Heard About It
Last Thursday, U.S. Treasury Secretary Steve Mnuchin was the sole witness called before the House Financial Services Committee to answer questions on the state of financial stability in the U.S. Under the Dodd-Frank financial reform legislation of 2010, the U.S. Treasury Secretary also heads the Financial Stability Oversight Council (F-SOC) which is charged with monitoring any threats to the stability of the U.S. financial system in order to prevent a replay of the epic financial crash of 2008 and attendant devastation to the U.S. economy.
During the hearing, Mnuchin was grilled time and again by numerous Republicans and Democrats on what is necessitating the Federal Reserve Bank of New York (New York Fed) to be pumping out hundreds of billions of dollars per week to Wall Street trading houses via the repurchase agreement (repo loan) market.
But instead of reporting on that critical line of questioning and Mnuchin’s lack of meaningful answers, when the New York Times reported on the hearing it focused instead on a tiny aspect of the hearing. Its headline read: “U.S. Objects to World Bank’s Lending Plans for China.” It made no mention at all of the still unexplained but ongoing repo crisis on Wall Street.
Since the repo lending crisis started on September 17, when major Wall Street banks simply backed away from overnight lending to some financial institutions, forcing loan rates to spike to 10 percent from approximately 2 percent, the New York Times has written exactly one article on this new financial crisis. Wall Street On Parade has written more than three dozen articles on this critical topic.
During last Thursday’s hearing, Mnuchin attempted to pass off the repo loan crisis as a two-day event that occurred on September 16 and 17. The lack of reporting on the matter by the New York Times would tend to support that narrative in the public’s mind.
The reality is that the New York Fed has now pumped a cumulative total of more than $4 trillion into this black lending hole on Wall Street and has been making upwards of $100 billion a day in loans to Wall Street trading houses every business day since September 17.
During the almost three months that the New York Times has not reported on this flashing red sign of a new crisis on Wall Street, the Federal Reserve has dramatically increased its original level of support to the repo market. It has expanded its overnight loans to include loans of up to 43 days; it has increased the dollar amount of overnight loans to as much as $120 billion available daily; and it has announced that it will be buying $60 billion a month in U.S. Treasury Bills, effectively creating a new round of Quantitative Easing (QE-4) – a tactic it has not used since the financial crisis.
Wall Street is New York City’s most profitable hometown industry. Over many decades, the New York Times appears to have developed the mindset that what is good for Wall Street is good for The New York Times. (See The New York Times Has a Fatal Wall Street Bias.) The American people need a free and trustworthy press they can count on to give them an early heads up of a brewing financial problem.
Mnuchin said he shared her concerns about Deutsche Bank but that it would be inappropriate for him from a regulatory standpoint to comment on any specifics.
Porter then asked Mnuchin to state how many people work directly for the Financial Stability Oversight Council (F-SOC). Other members of the panel had earlier commented on how the Trump administration has gutted staffing and budgets for F-SOC and the Office of Financial Research.
After much beating around the bush, Mnuchin finally admitted that only about a dozen people work for F-SOC – the Federal agency that is supposed to be the alarm siren for dangerous risks to the U.S. financial system.
Congressman Roger Williams (R-Texas) has taken to demanding that each witness appearing before the House Financial Services Committee answer his question as to whether they are a capitalist. He asked the same question of Mnuchin at last Thursday’s hearing. Mnuchin said he was indeed a capitalist.
In what appeared to be a slap at Williams, Congresswoman Rashida Tlaib asked Mnuchin if he believed in socialism for corporations. After a pause, and after repeating her question to himself, Mnuchin said he did not.
https://wallstreetonparade.com/2019/12/congress-held-a-hearing-on-the-feds-bailout-of-the-repo-market-heres-why-you-havent-heard-about-it/
the Q & A portion at the link and the money quote from French Hill (R-Arkansas) was:
I think the concern is that the New York Fed is not supporting the repo market. They are the repo market. I think that’s the challenge.
https://wallstreetonparade.com/2019/12/congress-held-a-hearing-on-the-feds-bailout-of-the-repo-market-heres-why-you-havent-heard-about-it/
>It's going to be an interesting future when the ice does melt and all the countries fighting over it.
I'll posit that they are already fighting over it and have been for many years. we just don't see it.