Rigged Markets

The few getting richer, all others getting poorer, isn’t capitalism at work, at all — it’s manipulators and the Fed. To fix that.

(Note: underlined words/phrases correspond to links.)

The following is a continuation of the reasoning & rationale for the Bill-Request begun at Main Street Gov, summarized here.

And, now, to unmasking the Masquerade from the Washington DC Federal Reserve’s Marriner Eccles building to the Manhattan Federal Reserve’s 33 Liberty building, and opening up a Book of Revelation on the Bankers’ Bank, to expose its “extraordinary measures” like QE to allegedly “save the economy” for what they truly are, and to classify that unmasked exposé as:

Quod Erat Demonstrandum or QED’d!

As we wrote under The Reason To Be:

Irrespective of what the official line is out of the Fed, LSAP/QE is none other than an attempt at a replay of the zombie romance movie “Warm Bodies” in which a human girl, played by actress Teresa Palmer, tries to revive a zombie boy, played by actor Nicholas Hoult, using love to turn zombie into human — think of the Fed (or the ECB, for that matter) as Ms. Palmer, and an undead global systemic banking system as Mr. Hoult, and think of the money the Fed and the ECB are injecting into front-running opportunity for the banks as the love the human injected into the zombie.

The reality is, any keen observer of how the Permanent Open Market Operations desk at the New York Fed operates, knows LSAP/QE to be none other than a program:

• to swap bad paper for good paper on bank balance sheets
• to dramatically widen all sorts of bank margins
• to bountifully increase all sorts of bank fees & commissions
• to turn capital losses at banks into capital gains and then magnify those gains
• to very substantially lower bank borrowing costs
• for banks to front-run the Fed

As we noted elsewhere on this subject, the self-admitted “Quarterback” of the Fed’s own LSAP programs, former Fed official Andrew Huszar, called QE/LSAP (quote) “the greatest backdoor Wall Street bailout of all time [that] the central bank continues to spin as a tool to help Main Street.” We salute Mr. Huszar for his Nov 11 2013 op-ed in The Wall Street Journal aptly entitled “Confessions of a Quantitative Easer”, but we would tweak his aforementioned confession a bit, as follows: QE may have been a bank bailout instrument when it first began, but — soon after — it morphed into more of a banker executive comp & bonus enhancement mechanism.

As we also wrote under The Reason To Be:

Total outstanding household debt was somewhere near $14 trillion in 2008 when ZIRP began. Seven years later, it was about $0.5 trillion less, meaning it wasn’t households that borrowed to advantage ZIRP. It wasn’t small businesses that borrowed, either.

So, was it big businesses that borrowed to advantage ZIRP? Yes and no. No, they did not borrow the free short-term money to finance long-term plant & equipment that’d create jobs. But, yes, they did borrow the free short-term money to finance share repurchases, to elevate earnings per share, so that their stock options would exercise and make them even richer.

Matter of fact, about all of the big business debt taken on since 2008, to advantage ZIRP, has gone to stock buybacks and debt-fueled takeovers (the kind that resulted in shutdowns of plant & equipment, closures of overlapping enterprises that were formerly competing that no longer needed to compete, or streamlining as they called it, translating to layoffs of workers).

ZIRP was also fantastic for market speculators, who used zero cost carry trades by the truckload to inflate asset markets to dizzying heights.

Wall Street loved it. The higher every asset class went, the more money the bankers made off public and private offerings, commissions, spreads, trading profits, investment banking fees, you name it.

But that was the whole idea of the Federal Reserve’s, wasn’t it — to again give bankers the world and everything in it, when — in 2008 — with their banks dead, lawsuits looming, and jail time waiting for accounting and securities fraud, those bankers came pretty damn close to not even having a pot to piss in.

Why would the Fed allow such a transition? Ask a former Chairman who’s charging $200,000 to dine with him and $400,000 to hear him speak, with those paying being among the biggest beneficiaries of QE.

Recall: In 2007, when Lehman Bros was bankrupt and struggling to sell itself to no avail, and when much of Wall Street was either institutionally bankrupt or tumbling down a steep slope to insolvency, and the bankers knew of an impending doom from the dismal housing data they were awash in, executive compensation and bonuses reached a crescendo that year, in an exercise of bleed the corpse for all it’s got.

Citigroup CEO Chuck Prince would in July of 2007 phrase the Wall-wide gymnastics as: “When the music stops … things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

By “dancing” he meant book-cooking, of course — although you can count on him to deny that. And as for “music” — he meant the music to a game of musical chairs with no chairs, anywhere to be found.

As the meltdown of Sep 2008 fast became a fading memory on Wall, executive comp again took off, and went ballistic fast, courtesy of QE. By 2010, the QE front-running profits were increasingly re-routed from income on the P&L’s to the pockets of execs, instead of where it should’ve gone, that being towards capitalization of what were still tattered balance sheets.

The Fed and foreign central banks had to be complicit in this profit detour — as bank ‘regulators’ they could’ve very easily turned off the comp/bonus spigot if they wanted to. Which leads us to our first natural assumption: The central bankers of the world, with the Fed leading by example, appeared to be conducting so-called monetary policy not to recapitalize the battered banks, but to further enrich the bankers. Which leads us to our second natural assumption: There had to be an understanding of quid pro quo in the equation.

Needless to say, central bank chiefs and their henchmen are routine passengers at the revolving door…

• 5 years prior to heading-up the Fed, for example, Alan Greenspan consulted for the fraud-filled Lincoln Savings S&L and its chief exec Charles Keating; after leaving the Fed, Greenspan would go on to sell his services to Deutsche Bank, Paulson & Co, and PIMCO
• Before becoming head honcho at the ECB, Mario Draghi was (among other relationships with banking) Vice Chairman and Managing Director of Goldman Sachs International
• Ben Bernanke would wait till after his Fed career to make his fortune — with not just book advances that would make the Clintons blush to the tips of their extending noses, and dinner advances that would make Kim Kardashian, on a paid-date, blush all the way down to the totality of her derrière — but through associations we expect him to make, like the one reported in April 2015, about him teaming up with that Temple of High Frequency Trading, Citadel, whose connections to the New York Fed, and to providing “liquidity” to the stock market on behalf of the NY Fed, should have special mention in future annals of revolving-door record-keeping

Per the article CFTC Commissioner Bart Chilton’s Exit Interview by Mark Melin:

“I’m a CFTC Commissioner and I’ve been trying to find out what the banks own in the way of commodities… I’ve been trying to find out from the Federal Reserve, which has this information… I’ve asked the Federal Reserve to… give me a link to the information they have. I receive links but they go to nowhere…”

Encouraging Market Manipulation, of commodities etc, may have started as part-and-parcel to the Federal Reserve’s systemic bank impaired-asset reflation-and-liquefaction regimen, and ended up front-and-center to the Fed’s ‘keep the music playing’ regime — but this Bill-Request also asks that the conscientious regulators, backed by no-nonsense prosecutors, put an end to the rigging and fixing of nearly every market known to man, by agents and proxies of the New York Fed in particular, and thereby terminate the manipulators from furthering economic inequality that’s been on the incline since the very start of the alleged economic “recovery”.

From the Central Bank Incentive Program, to permitting the abuse of quote-stuffing, to allowing one trader control of 40% of the crude oil market, to tolerating banks controlling everything under the sun, something’s gone awfully awry in what was supposed to be the land of the free. So here’s to also calling for the appointment of a Special Inspector General for Market Integrity Oversight (SIGMO), with the authority to arrest any and all violators of the laws that underpin our nation’s deep-seated free-market philosophy, and the tools to expose those who undermine it.

And, in conclusion, let’s finally get to that Chameleon of chameleons, the IMF…

Under The Reason To Be, we wrote:

Don’t for a moment think the IMF helps out countries in trouble, or their peoples. The IMF’s purpose is to bail out bankers who’d recklessly and intentionally over-lent to countries, leaving those countries unable to service that debt.

Reckless over-lending, at a premium yield to the credit-unworthy especially, is great for banker bonuses. That’s why they loved Greece’s inclusion in the Eurozone, even if it took bogus accounting with a derivatives-based makeover by Goldman Sachs to get there. That’s why they loved, and continue to love over-lending to subprime borrowers, whether it be for houses or cars they know the borrowers cannot afford. As Jamie Dimon, the CEO of JP Morgan Chase wrote in a letter to shareholders: “Low quality revenue is easy to produce, particularly in financial services. Poorly underwritten loans represent income today and losses tomorrow.”

But why worry about the “losses tomorrow” when there’s the taxpayer there, offered on a platter for the rescue, right?

Anyway, the IMF buys the unserviceable debt of countries at a premium value from the bankers, and then — with all its might — bullies those countries and their peoples into submission to whatever austerity the IMF deems necessary.

Since the American taxpayer is by far the largest contributor to the IMF — and in fact the contributor of the lion’s share of its budget — this Bill-Request furthermore asks that American people be given an opportunity to take a close look at where their IMF-designated money is going and to whom.

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