Friday, March 13, 2020

Fed Took The Hose Off Its Money Spigot Fire Hydrant

Source: Federal Reserve Bank of New York

OPERATING POLICY

Statement Regarding Treasury Reserve Management Purchases and Repurchase Operations

March 12, 2020

The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has released a new monthly schedule of Treasury securities operations and has updated the current monthly schedule of repurchase agreement (repo) operations. Pursuant to instruction from the Chair in consultation with the FOMC, adjustments have been made to these schedules to address temporary disruptions in Treasury financing markets. The Treasury securities operation schedule includes a change in the maturity composition of purchases to support functioning in the market for U.S. Treasury securities. Term repo operations in large size have been added to enhance functioning of secured U.S. dollar funding markets.
• As a part of its $60 billion reserve management purchases for the monthly period beginning March 13, 2020 and continuing through April 13, 2020, the Desk will conduct purchases across a range of maturities to roughly match the maturity composition of Treasury securities outstanding. Specifically, the Desk plans to distribute reserve management purchases across eleven sectors, including nominal coupons, bills, Treasury Inflation-Protected Securities, and Floating Rate Notes. The distribution of purchases across sectors will be the same distribution as the Desk uses to reinvest principal payments from the Federal Reserve's holdings of agency debt and agency MBS in Treasury securities. The first such purchases will begin tomorrow, March 13, 2020.

• Today, March 12, 2020, the Desk will offer $500 billion in a three-month repo operation at 1:30 pm ET that will settle on March 13, 2020. Tomorrow, the Desk will further offer $500 billion in a three-month repo operation and $500 billion in a one-month repo operation for same day settlement. Three-month and one-month repo operations for $500 billion will be offered on a weekly basis for the remainder of the monthly schedule. The Desk will continue to offer at least $175 billion in daily overnight repo operations and at least $45 billion in two-week term repo operations twice per week over this period.
These changes are being made to address highly unusual disruptions in Treasury financing markets associated with the coronavirus outbreak. [not true; read Wall Street On Parade article below] Reserve management purchases into the second quarter will continue to be conducted with this maturity allocation. The terms of operations will be adjusted as needed to foster smooth Treasury market functioning and efficient and effective policy implementation.

Detailed information on the schedule of Treasury purchases is provided on the Treasury Securities Operational Details page. Detailed information on the schedule and parameters of term and overnight repo operations are provided on the Repurchase Agreement Operational Details page.
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Source: Wall Street on Parade

The Fed Has 233 Secret Documents about JPMorgan's Potential Role in the Repo Loan Crisis


By Pam Martens and Russ Martens: March 13, 2020 ~

The Federal Reserve Board of Governors has acknowledged to Wall Street On Parade that it has 233 documents that might shed some light on why JPMorgan Chase was allowed by the Fed to draw down $158 billion of the reserves it held at the Fed last year, creating a liquidity crisis in the overnight loan market according to sources on Wall Street. After taking four months to respond to what should have been a 20-business day turnaround on our Freedom of Information Act request, the Federal Reserve denied our FOIA in its entirety. (Our earlier request to the New York Fed resulted in the same kind of stonewalling. (See The New York Fed Is Keeping JPMorgan's Secrets Close to Its Chest.)

The Wall Street liquidity crisis forced the Federal Reserve, beginning on September 17 of last year, to begin making tens of billions of dollars in loans each business day to the trading houses on Wall Street. It calls these firms its "primary dealers" since they also engage in open market operations with the Fed and are under contract with the government to make purchases of Treasury securities during Treasury auctions, a dangerous symbiotic relationship to say the least. This was the first time since the financial crisis of 2008 that the Fed had made these so-called repo loans to the trading houses on Wall Street.

On September 17, the word "coronavirus" was unknown to most people around the world. The spread of the virus in China did not begin to make news until January of this year. Thus, the roots of the liquidity crisis on Wall Street cannot be assigned to the coronavirus, although we have every expectation that Wall Street and its minions will make every effort to do so as the history of this crisis is written – no doubt with the aid of Andrew Ross Sorkin and Paul Krugman of the New York Times.

The first coronavirus case in the U.S. to be confirmed by the Centers for Disease Control and Prevention (CDC) was reported by CNN on January 22 of this year. It had been confirmed by the CDC on January 21. But the Fed's repo loan money spigot by that time had already pumped out $6 trillion in cumulative repo loans to the trading houses on Wall Street. And the dollar amounts of its emergency loans kept rising, as evidenced by the ongoing official statements that the New York Fed published on its website.

On October 4, the Fed announced that it was extending what was supposed to be a short-term, temporary loan program into November, as we reported that Wall Street mega banks had announced 68,000 in job cuts. Again, that was long before any coronavirus problem.

On October 23, 2019, before there was any hint of a coronavirus problem anywhere in the world, the New York Fed announced a massive expansion of its loans to Wall Street. It said it would be funneling up to $120 billion a day in cheap overnight loans to Wall Street trading firms, a daily increase of $45 billion from its previously announced $75 billion a day. In addition, it said it would increase its twice-weekly 14-day term loans to Wall Street from $35 billion to $45 billion. That would bring the weekly offerings up to a potential $690 billion a week. We noted at the time that if the Wall Street firms were getting these loans rolled over and over, as they did during the Fed's bailout in 2008, they are effectively permanent loans at unprecedented low interest rates for firms that are far from AAA credits. To derive a windfall from these loans, all the trading firms would have to do is borrow from the Fed at 1.50 percent and make margin loans to stock traders at 7 or 8 percent.

We knew from the New York Fed's unprecedented $29 trillion money spigot to the Wall Street trading firms during the 2008 financial crisis that this was going to eventually turn into a full scale bailout of the latest bubble on Wall Street, just as it had in 2008. And because the mainstream media was ignoring the story, we took it upon ourselves to chronicle the Fed's repo loan activities in more than five dozen articles which we have archived for our readers here.

Please go to Wall Street on Parade to read the entire article.
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Related:

Paul Krugman Returns to Perpetuating the Big Lie for Wall Street

Federal Reserve Announces Unprecedented $1.5 Trillion in Loans to Wall Street Today and Tomorrow


Poor guys, that's it? Just $78 billion?

World's 20 Richest, Led By Jeff Bezos, Shed More Than $78 Billion Amid Thursday's Market Rout


The criminal deviants running this system just took the hose off the Fed's money spigot fire hydrant and there is now an unprecedented flow...



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