October 2024 - cypherpunks - lists.cpunks.org

Palantir hires China hawk, former congressman, Mike Gallagher
by Gunnar Larson 22 Oct '24

22 Oct '24

https://www.axios.com/2024/08/22/palantir-hires-gallagher-defense?utm_sourc… Palantir Technologies has hired former Rep. Mike Gallagher (R-Wisc.) to run its defense business, charged with identifying contract opportunities and guiding R&D.

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Jerome Powell’s Fed Notches an Historic Record of $204 Billion in Cumulative Operating Losses – Losing Over $1 Billion a Week for More than Two Years
by Gunnar Larson 22 Oct '24

22 Oct '24

https://wallstreetonparade.com/2024/10/jerome-powells-fed-notches-an-histor… Commentary Next to Arrows Has Been Added by Wall Street On Parade. By Pam Martens and Russ Martens: October 21, 2024 ~ According to its own FRED data, the last time the central bank of the United States – the Federal Reserve – operated in the green was September 14, 2022, more than two years ago. Since then, it has been consistently losing over $1 billion a week with its cumulative operating losses now topping $204 billion as of the last reporting by the Fed on October 16, 2024. Operating losses of this magnitude are unprecedented at the of Fed, which was created in 1913. Fed Operating Losses Total a Cumulative $204 Billion If a publicly-traded company had been bleeding operating losses of more than $1 billion a week for more than two years, there would very likely be a change of leadership at the top. But Fed Chair Jerome Powell is no ordinary mortal. He survived the worst trading scandal in the Fed’s history – even after his own trading conduct came into question. These losses at the Fed are operating losses – where expenses exceed earnings. They are not to be confused with the unrealized losses on the Fed’s underwater debt securities that the Fed holds on its balance sheet, which it does not mark to market. The Fed is experiencing these operating losses because the interest it is earning on its $6.6 trillion portfolio of debt securities that it acquired through its Quantitative Easing (QE) operations is less than the overly generous interest payments it is making to banks. These payments include the 4.90 percent interest the Fed is paying to the megabanks on Wall Street (and other Fed member banks) for the reserves they hold with the Fed. This morning, the yield on the benchmark 10-year U.S. Treasury note is just 4.13 percent. That yield hasn’t climbed above 4.50 percent for more than four months. So why is the Fed continuing to pay out the overly generous rate of 4.90 percent interest on reserves to the banks it supervises when it’s bleeding losses? Is the Fed blatantly subsidizing bank profits while some of these same megabanks charge double digit interest rates to consumers on their credit cards? (See, for example: While JPMorgan Chase Was Getting Trillions of Dollars in Loans at Almost Zero Percent Interest from the Fed, It Was Charging Americans Hit by the Pandemic 17 Percent on their Credit Cards.) The Fed is also paying out the overly generous rate of 4.80 percent on its reverse repo operations with giant mutual fund companies – many of which are owned by the megabanks on Wall Street. And, the Fed is paying a ridiculous 6 percent dividend to member shareholder banks with assets of $10 billion or less. Banks with assets above $10 billion receive the lesser of 6 percent or the yield on the 10-year Treasury note at the most recent auction prior to the dividend payment. U.S. taxpayers have good reason to be alarmed by the Fed’s ongoing operating losses. That’s because when the Fed is operating in the green, the Fed, by law, turns over excess earnings to the U.S. Treasury – thus reducing the amount the U.S. government has to borrow by issuing Treasury debt securities. According to Fed data, between 2011 and 2021, the Fed’s excess earnings paid to the U.S. Treasury totaled more than $920 billion. The loss of remittances from the Fed means that the U.S. government will go deeper into debt, putting a heavier tax burden on the U.S. taxpayer and raising the risk of another credit rating agency downgrade of U.S. sovereign debt. Another problem at the Fed is that instead of being a beacon for pristine accounting practices, it is engaging in creative accounting according to experts. A January 31 paper by Paul H. Kupiec and Alex J. Pollock published by the American Enterprise Institute explains in stark detail why the Fed has negative capital under GAAP accounting. The researchers write: “In 2011, the Fed unilaterally decided to adopt non-standard accounting practices that book operating losses as a ‘negative liability’ in its H.4.1 releases and as a ‘deferred asset’ in its audited financial statements [writing the following at the time:] ‘[I]n the unlikely scenario in which realized losses were sufficiently large enough to result in an overall net income loss for the Reserve Banks, the Federal Reserve would still meet its financial obligations to cover operating expenses. In that case, remittances to the Treasury would be suspended and a deferred asset would be recorded on the Federal Reserve’s balance sheet.’ “Unfortunately for the Fed, the ‘unlikely scenario’ has become reality. Regardless of the name used, the ‘deferred asset’ account acts to hide the basic immutable fact that operating losses have consumed the Fed’s capital. “Under the Fed’s unique accounting policy, operating losses do not reduce the Federal Reserve’s reported total capital. The accumulated losses in the ‘deferred asset’ account allow the Fed to report the same capital account balance, no matter how large its accumulated losses. Even if it lost 100 times its capital, or $4.3 trillion, the Fed would still report that it has positive $43 billion in capital. Similar creative ‘regulatory accounting’ has not been utilized by financial institutions since the 1980s when it was used to prop up failing savings and loans.” The researchers posted a line-item chart on page 8 of their report showing how the Fed’s accounting compares with GAAP accounting. As of December 27, 2023, the Fed’s accounting produces $42.85 billion in capital. Under GAAP accounting, the Fed’s capital stands at a negative $88.7 billion. As anyone who is a regular reader of Wall Street On Parade will easily guess, the New York Fed has the most dramatic negative capital under GAAP accounting among the Fed’s 12 regional Fed banks. The researchers write: “Restating each of the 12 individual FRBs [Federal Reserve Banks] December 27, 2023 capital accounts using GAAP, 8 have negative GAAP capital. Exhibit 2A shows the FRBs that have GAAP capital deficits larger than $1 billion. The Federal Reserve Bank of New York, with a GAAP capital nearly negative $70 billion, has the largest capital deficit followed by the Federal Reserve Bank of Richmond with negative GAAP capital approaching $12 billion and the Federal Reserve Bank of Chicago with $7.6 billion in negative GAAP capital.” For a deeper understanding of the New York Fed’s symbiotic relationship with the megabanks on Wall Street, see These Are the Banks that Own the New York Fed and Its Money Button and If Wall Street’s Mega Banks Are Safe and Sound as the Fed Says, Why Do They Need a Half Trillion Dollar Bailout Facility at the New York Fed?

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Academic Paper Finds U.S. Banking System Is Less Safe Today than Before the 2010 Dodd-Frank Financial Reform Legislation Was Passed
by Gunnar Larson 22 Oct '24

22 Oct '24

https://wallstreetonparade.com/2024/10/academic-paper-finds-u-s-banking-sys… By Pam Martens and Russ Martens: October 22, 2024 ~ Four researchers at the University of Westminster School of Finance and Accounting in London have taken a hard look at the much-touted Dodd-Frank financial reform legislation in the U.S. that was signed into law by President Barack Obama in 2010. The voluminous 848-page bill followed the greatest financial crash in the U.S. since the Great Depression. Unfortunately, it was big on word count and short on iron-clad reforms, leaving the implementation of final rules to be negotiated by revolving-door regulators and an army of Wall Street lobbyists and lawyers. (For how that has played out over the ensuing 14 years, see here, here, here and here.) The authors of the study are Dr. Julie Ayton; Professor Abdelhafid Benamraoui; Dr. Huyen (Trang) Ngo; and Dr. Stefan van Dellen. They define the purpose of the study as follows: “The research paper tests two critical research hypotheses, (i) whether the 2010 Dodd-Frank Act reduced bank post-merger contribution to systemic risk, and (ii) its role in solving the too-big-to-fail problem induced by large bank mergers. The study results reject both hypotheses indicating that the Dodd-Frank Act was ineffective at reducing systemic risk and in particular the risk attributed to mergers among larger banks, bringing back the fundamental issue and argument of too-big-to-fail and how this can be addressed through regulatory changes or reinforcement.” A key finding of their study is the following: “We also find that the larger the bidder, the greater its contribution to systemic risk, but only in the post-Dodd-Frank period. In other words, the post-legislation increase in systemic risk contribution is even more important for large acquiring banks.” That finding on bigness is in line with an international banking study using 150 years of data that we reported on in October 2023. We wrote at the time: “It took eight years of research to compile a data set of annual balance sheets of more than 11,000 commercial banks dating back to 1870 in 17 advanced economies. And in every country, the study arrived at the same finding: concentrating the banking system in the hands of five or less giant banks leads to financial instability and more severe financial crises. The bank balance sheets of the following countries were examined: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States.” In the United States, there are just four commercial megabanks with more than $1 trillion in assets. As of June 30, those four are: JPMorgan Chase Bank NA with $3.5 trillion in consolidated assets; Bank of America NA with $2.6 trillion; Wells Fargo Bank NA with $1.7 trillion; and Citigroup’s Citibank NA with $1.678 trillion in consolidated assets. JPMorgan Chase Bank NA is not just the largest bank in the United States by a large margin but it has been officially declared the riskiest bank by a large margin by its regulators. The federal agency that is charged with providing an early warning system for serious cracks in financial stability is the Office of Financial Research (OFR). At the end of the first quarter of 2023, its Contagion Index gave JPMorgan Chase Bank a grade of 420, which ranked it dramatically more dangerous than its peer banks. But in the following quarter of 2023, its federal banking regulators approved JPMorgan Chase Bank purchasing the failing bank, First Republic Bank. According to the OFR, JPMorgan Chase Bank’s Contagion Index reading now stands at 472, dwarfing its peer banks by an ever-widening margin. (See chart above.) Michael Hsu is the Acting Comptroller of the Currency, the regulator of national banks (those operating across state lines). He was the one federal banking regulator that could have rejected JPMorgan Chase’s offer to buy First Republic Bank. At a July 12, 2023 Senate hearing, Senator Elizabeth Warren had this to say about Hsu’s conduct: “When First Republic Bank collapsed in April, the bank was ultimately sold to the biggest bank in America, JP Morgan Chase. That sweetheart deal cost the Federal Deposit Insurance Fund $13 billion. Meanwhile, overnight, the country’s biggest bank got $200 billion bigger. And what happened to the regulators? The Acting Comptroller of the Currency, Michael Hsu, rubber stamped the deal in record time. When I asked Mr. Hsu at a hearing in May to explain how this merger was approved, he was unable to provide a clear answer. “But the overall picture gets worse. Instead of inattentive regulators who don’t use their tools to block increasing consolidation, leaders within the Biden Administration seem to be inviting more mergers. In a May 2023 statement before the House Financial Services Committee, Acting Comptroller Hsu reassured banks that the agency would be ‘open-minded’ while considering merger proposals….” Senator Warren said this attitude was “courting disaster.” JPMorgan Chase’s history of gobbling up its commercial bank competitors shows just how meaningless anti-trust law has become in the United States. In 1955, Chase National Bank merged with The Bank of the Manhattan Company to form Chase Manhattan Bank. In 1991, Chemical Bank and Manufacturers Hanover announced their merger. Both banks had been severely weakened – Chemical from bad real estate loans and Manufacturers from bad loans to developing nations. In 1995, Chemical Bank merged with Chase Manhattan Bank. In 2000, JPMorgan merged with Chase Manhattan Corporation. In 2004, JPMorgan Chase merged with Bank One. In 2008, during the height of the financial crisis, JPMorgan Chase was allowed to buy Washindgton Mutual. These are just the largest bank consolidations. Over the years, Chase acquired dozens of smaller banks. At the time of JPMorgan Chase’s purchase of Washington Mutual in 2008 – WaMu was the largest bank failure in U.S. history. In 2023, when JPMorgan Chase was allowed to purchase First Republic Bank, it was the second largest bank failure in U.S. history. JPMorgan Chase was also allowed to buy the failing Bear Stearns during the banking crisis of 2008, but Bear Stearns did not own a federally-insured commercial bank in the U.S. However, Bear Stearns did own Bear Stearns Bank Ireland, which JPMorgan renamed as JPMorgan Bank (Dublin) PLC. In 2012, JPMorgan Chase wrote that it was “the only EU passported bank in the non-bank chain of JPMorgan and provides the firm with direct access to the European Central Bank repo window.” Increasingly, federal banking regulators function as little more than deer caught in the headlights.

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Mastercard's Legal Chief Departs For Tech Co. Coherent
by Gunnar Larson 22 Oct '24

22 Oct '24

Mastercard's Legal Chief Departs For Tech Co. Coherent <https://www.law360.com/health/articles/1892266?nl_pk=6422bbc2-a823-4be5-9a9…> By Rae Ann Varona Rob Beard is leaving his post as Mastercard Inc.'s chief legal officer and global policy head to join Coherent Corp. as its CLO, the industrial laser technology company announced Monday. Read full article » <https://www.law360.com/health/articles/1892266?nl_pk=6422bbc2-a823-4be5-9a9…> | Save to favorites » <https://www.law360.com/health/articles/1892266?nl_pk=6422bbc2-a823-4be5-9a9…>

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Google, Meta Want Out Of GoodRx Health Data Sharing Suit
by Gunnar Larson 22 Oct '24

22 Oct '24

Google, Meta Want Out Of GoodRx Health Data Sharing Suit <https://www.law360.com/health/articles/1892170?nl_pk=6422bbc2-a823-4be5-9a9…> By Hailey Konnath Google, Meta Platforms and Criteo have asked a California federal court to cut them loose from litigation alleging that GoodRx improperly shared patients' protected health information with the tech companies, saying the claims are "fundamentally flawed." Motion attached | Read full article » <https://www.law360.com/health/articles/1892170?nl_pk=6422bbc2-a823-4be5-9a9…> | Save to favorites » <https://www.law360.com/health/articles/1892170?nl_pk=6422bbc2-a823-4be5-9a9…>

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Feds Say Doctor Used Pandemic Funds For Cars, Real Estate
by Gunnar Larson 22 Oct '24

22 Oct '24

Feds Say Doctor Used Pandemic Funds For Cars, Real Estate <https://www.law360.com/health/articles/1892105?nl_pk=6422bbc2-a823-4be5-9a9…> By Elliot Weld A Washington state dermatologist used $1.5 million from a loan intended for small business COVID-19 relief on two luxury Porsches, a second home and a storage unit, prosecutors said Monday. Read full article » <https://www.law360.com/health/articles/1892105?nl_pk=6422bbc2-a823-4be5-9a9…> | Save to favorites » <https://www.law360.com/health/articles/1892105?nl_pk=6422bbc2-a823-4be5-9a9…>

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9th Circ. Judge Slams 'Reprehensible' Policy In Jail Death
by Gunnar Larson 22 Oct '24

22 Oct '24

9th Circ. Judge Slams 'Reprehensible' Policy In Jail Death <https://www.law360.com/health/articles/1892086?nl_pk=6422bbc2-a823-4be5-9a9…> By Greg Lamm A Ninth Circuit judge on Monday blasted a healthcare contractor's policy that denied hospital treatment for a woman in a Washington jail who died from a ruptured intestine, but nevertheless questioned if a $24 million punitive damage jury award was excessive. 2 documents attached | Read full article » <https://www.law360.com/health/articles/1892086?nl_pk=6422bbc2-a823-4be5-9a9…> | Save to favorites » <https://www.law360.com/health/articles/1892086?nl_pk=6422bbc2-a823-4be5-9a9…>

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DC Moves To Buy NBA, NHL Arena In $800M Overhaul Plan
by Gunnar Larson 22 Oct '24

22 Oct '24

DC Moves To Buy NBA, NHL Arena In $800M Overhaul Plan <https://www.law360.com/governmentcontracts/articles/1892158?nl_pk=4126fe73-…> By Nate Beck Washington, D.C., Mayor Muriel Bowser on Monday announced the introduction of legislation to buy Capital One Arena for $87.5 million to keep the Washington Capitals and Washington Wizards in town, after months of negotiations with Sidley Austin LLP advising the arena owner. Read full article » <https://www.law360.com/governmentcontracts/articles/1892158?nl_pk=4126fe73-…> | Save to favorites » <https://www.law360.com/governmentcontracts/articles/1892158?nl_pk=4126fe73-…>

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US Trustee, Insurers Pan New Syracuse Diocese Ch. 11 Plan
by Gunnar Larson 22 Oct '24

22 Oct '24

US Trustee, Insurers Pan New Syracuse Diocese Ch. 11 Plan <https://www.law360.com/insurance/articles/1892051?nl_pk=59612751-8689-4b1e-…> By Ben Zigterman The U.S. Trustee's Office and several insurers objected to the opt-out mechanism for third party releases in the latest Chapter 11 plan from the Roman Catholic Diocese of Syracuse, New York, arguing that such releases are barred by the U.S. Supreme Court's recent decision in Purdue Pharma. 2 documents attached | Read full article » <https://www.law360.com/insurance/articles/1892051?nl_pk=59612751-8689-4b1e-…> | Save to favorites » <https://www.law360.com/insurance/articles/1892051?nl_pk=59612751-8689-4b1e-…>

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SEC, CFTC Chairs Talk Crypto, AI & Wall Street Texting Sweep
by Gunnar Larson 22 Oct '24

22 Oct '24

SEC, CFTC Chairs Talk Crypto, AI & Wall Street Texting Sweep <https://www.law360.com/compliance/articles/1892089?nl_pk=ab5ce197-c1fb-4d8e…> By Jessica Corso The leaders of the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission appeared before an audience of top financial professionals Monday to discuss the future of cryptocurrency and artificial intelligence regulations and to defend against accusations that ongoing probes of brokers' use of off-channel communications were too harsh. Read full article » <https://www.law360.com/compliance/articles/1892089?nl_pk=ab5ce197-c1fb-4d8e…> | Save to favorites » <https://www.law360.com/compliance/articles/1892089?nl_pk=ab5ce197-c1fb-4d8e…>

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