Fed Doubled Bailouts Again Dec. 13 in Out-of-Control Crisis — Trump Being Set Up for Crash
Monday morning a series of bank economists, beginning at Bank of America, proclaimed that the Federal Reserve has finally, after three months, brought the interbank lending liquidity crisis under control, and there will be “no crisis” and “no stress” on banks or interest rates at year-end.
This is very much to be doubted, since simply to get these polyanna statements from the big banks, the New York Fed on Friday the 13th had to roughly double, again, the emergency liquidity loans it is making daily to its primary dealer banks. This money-printing liquidity-pumping has constantly expanded and extended since Sept. 17, with no let-up to the process in sight.
On Dec. 9 a Credit Suisse analyst with years of experience working at the Treasury and the New York Fed on the repo market, Zoltan Pozsar, warned that these three months of $50-100 billion daily liquidity bailouts (largely kept secret from the public) were not nearly enough to get the interbank market through the end of the year. The Fed, he said, would have to go to full quantitative easing in weeks, or establish a permanent repo lending facility for the banks, or both.
On Dec. 13, the New York Fed made new announcements, added to its continuing daily, two-week, and 42-day loans and securities purchases:
Liquidity loans from Dec. 13-Dec. 30: “At least $125 billion”
One-day loans on Dec. 30: “at least $75 billion”;
Dec. 31-Jan. 2 loans: “at least $150 billion”;
Jan. 3-14, 2020 loans: “at least $120 billion”.
The Fed will now be substituting itself for at least 15% of the $1.1 trillion/day interbank lending market, meaning that 15% of that market is unable to function. The biggest banks can’t, or much more likely refuse to lend that much to some other financial firms and/or banks EVEN FOR 24 HOURS, for fear of intraday insolvency of their counterparty.
One analysis, that of the “Wall Street on Parade” blog, is that “the New York Fed announced that over the next month it would shower the trading houses (primary dealers) on Wall Street with a total of $2.93 trillion in short-term loans … for a Wall Street liquidity crisis that has yet to be explained in credible terms.” Whatever the Fed chooses to call it, this is really massive, effective secret, quantitative easing (“QE4”).
It is easy to trace this to hedge funds which are liquidating, to unpayable corporate debts in the $15.5 trillion U.S. corporate debt bubble, and perhaps to one or more major banks ready to go. These all constitute the fuse: The bomb is these banks’ exposure to hundreds of trillions of dollars in derivatives bets, of which the worst exposure is to foreign exchange derivatives.
The American people cannot let President Donald Trump, fighting what is really an intelligence agency coup, get set up to be hit with a ‘2008’ financial crash or worse. It can be prevented. The four key actions proposed by the late economist and statesman Lyndon LaRouche are the essential means. Break up Wall Street banks with Glass-Steagall and establish a national credit institution, high-technology new infrastructure, a crash Moon-Mars mission for NASA.
These actions mean the U.S. economy can recover instead. If Americans mobilize and force them on the Congress as a way to ‘rehabilitate’ itself, the President is in a position to deal with China, Russia and India for a new international credit and monetary system that extends the new infrastructure and science projects into the developing countries.
Sitting still and waiting for the Federal Reserve to “plug” a vast liquidity hole in the Wall Street banking system, bigger than anything since the Lehman Brothers blowout and being kept almost entirely secret, is not a good alternative.