April 2024 - cypherpunks - lists.cpunks.org

Gold Has Set Historic Highs this Year as the Federal Reserve Has Reported Historic Losses
by Gunnar Larson 17 Apr '24

17 Apr '24

https://wallstreetonparade.com/2024/04/gold-has-set-historic-highs-this-yea… By Pam Martens and Russ Martens: April 17, 2024 ~ According to Federal Reserve data, for the first time in its history, the Fed has been losing money on a consistent basis since September 28, 2022. As of the last reporting date of April 10, those losses came to a cumulative $162.9 billion. As the chart above from the Fed indicates, the monthly losses thus far in 2024 have ranged from a high of $13.4 billion in January to $5.5 billion in March. We are not talking about unrealized losses on the debt securities the Fed holds on its balance sheet, which it acquired under its various Quantitative Easing programs. (The Fed does not mark to market the gains or losses on those securities on the basis that it plans to hold them to maturity.) We’re talking about real cash operating losses the Fed is experiencing from earning approximately 2 percent interest on its $6.97 trillion of mostly low-yielding debt securities while it continues to pay out 5.4 percent interest to the mega banks on Wall Street (and other Fed member banks) for the reserves they hold with the Fed; 5.3 percent interest it pays on reverse repo operations with the Fed; the eye-popping 6 percent dividend the Fed pays to member shareholder banks with assets of $10 billion or less; and the lesser of 6 percent or the yield on the 10-year Treasury note at the most recent auction prior to the dividend payment to banks with assets larger than $10 billion. An interesting market action is happening in tandem with the Fed’s growing operating losses. The price of gold has been setting historic new highs this year. From a futures front month price of around $2050 at the beginning of March, gold has topped $2,400 in recent days – dramatically outperforming the year-to-date performance of the S&P 500. Gold Price in the Futures Market Gold typically moves up when there is the threat of inflation, financial instability, or geopolitical threats. Russia’s war in Ukraine and the Middle East crisis are providing plenty of geopolitical threats; inflationary pressures have yet to be fully tamed. The Office of Financial Research’s Financial Stress Index, however, is showing a negative -1.6 reading, meaning it sees no major financial threat on the horizon. (It should be noted that the Index didn’t foresee the worst financial crash in 2008 since the Great Depression until it was in progress.) In a note last week, the international investment bank, UBS, noted the following factors impacting the price of gold: “The rally thus far has been driven by buyers who haven’t traditionally made material purchases, while the usual ETF [Exchange Traded Fund] buyers have remained net sellers. In fact, ETF holdings stand at a 4-year low. A combination of market concerns—including the sanctioning of USD-based assets, CNY [Chinese currency] devaluation fears, and renewed inflation risks—have supported solid demand from central banks and Asian investors. In January and February, preliminary data indicates central banks bought around 64 metric tons of gold and China imported 132 metric tons from Switzerland, a key gold refinery hub. We expect these buyers, who are less price sensitive, to continue accumulating gold in the months ahead.” Is it possible that the unprecedented losses at the Fed – the central bank of the United States – are also creating a flight to safety into gold? Wall Street’s veteran traders know that since 2007, it’s been the Fed that has rushed in with trillions of dollars in loans to bail out Wall Street mega banks when their share prices tank from their latest fiasco. A Fed crippled with its own ongoing losses and negative capital itself under GAAP accounting might have a tough time justifying more Wall Street bailouts to Congress. In addition, when the Fed is operating in the green, as it was on an annual basis for 106 years from 1916 through 2022, the Fed, by law, turns over its excess earnings to the U.S. Treasury – thus reducing the amount the U.S. government has to borrow. 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 the U.S. government will go deeper into debt, adding to the risk of another credit rating agency downgrade of U.S. sovereign debt. In testimony before the Senate Banking Committee in June 2023, Fed Chair Jerome Powell downplayed the operating losses at the Fed, stating that “these are paper losses, they have absolutely no effect on our ability to conduct monetary policy, or really on the economy, it’s just an accounting effect.” In January, two researchers, Paul Kupiec and Alex Pollock, put the negative capital problem and cash operating losses at the Fed into sharper perspective with an insightful report published at the think tank, American Enterprise Institute (AEI). The researchers wrote: “Notwithstanding the claims made by current and former Federal Reserve officials, the Fed’s cash operating losses and unrealized interest rate losses have already changed the way the Fed conducts monetary policy. In the past, when the Fed wanted to raise rates or shrink member bank reserve balances, it would sell SOMA [System Open Market Account] securities. But today, with the market value of its SOMA securities approximately $1 trillion less than their book value, selling these securities would immediately turn huge unrealized mark-to-market losses into actual cash losses. To avoid reporting such embarrassing losses, the Fed has committed to hold these securities until they mature to ‘avoid’ a loss, thus constraining its monetary policy options. “The Fed’s official plan is to shrink the size of its balance sheet by letting its SOMA securities mature over time. But if interest rates stay elevated, the Fed’s unrealized market value losses will systematically turn into cash operating losses because the Fed will keep paying more to finance its securities than the yield it earns on SOMA securities. FRBs’ [Federal Reserve Banks’] operating losses could continue for a long time.” Kupiec and Pollock further explain how the Fed is gambling on a dangerous confidence game: “As long as the public and financial market participants retain confidence in the FRB’s unsecured deposits, FRBs [Federal Reserve Banks] can continue to pay banks billions in interest and dividend payments while operating at a loss, deeply technically insolvent, and with asset shortfalls. Aided by an implicit guarantee, taxpayers will bear the burden of accumulating Federal Reserve losses that are hidden by Federal Reserve accounting policies and not included in reported government deficit statistics.” Editor’s Note: Nothing in this article should be construed as a recommendation from us to buy gold. Always consult with a professional financial advisor before making any investment decision.

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Video: Mark Zuckerberg on Thinking Bigger
by Gunnar Larson 17 Apr '24

17 Apr '24

Mark Zuckerberg on Thinking Bigger Video: https://www.instagram.com/reel/C539lkqSO4b/?igsh=a21renBhMTR0cWRx

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Crypto Agorism - Real life anonymity
by cryptoagorism＠morke.org 17 Apr '24

17 Apr '24

Crypto Agorism - Real life anonymity Crypto Agorism unites agorists and cryptocurrency users to build fair and free markets outside of the state, which bypass the state's unethical monopolies on money (fiat), identity (government ID) and markets (regulations). Access jobs, housing, healthcare, mail, sim cards and more without government ID or state permission. More info about agorism: Tor: http://rpms63f2aaxg22kbnkqdctkvemjsk2rehilnvdxvfwy3t2apu6liveqd.onion/ i2p: http://cryptoagorism.i2p/ Clearnet mirror: http://rpms63f2aaxg22kbnkqdctkvemjsk2rehilnvdxvfwy3t2apu6liveqd.onion.ly/ 100+ Agorist, Bitcoin, Monero, privacy and tech resources (Books, articles, podcasts, communities, services & more): http://rpms63f2aaxg22kbnkqdctkvemjsk2rehilnvdxvfwy3t2apu6liveqd.onion/agori… Video 1: http://rpms63f2aaxg22kbnkqdctkvemjsk2rehilnvdxvfwy3t2apu6liveqd.onion/crypt… Slides: http://rpms63f2aaxg22kbnkqdctkvemjsk2rehilnvdxvfwy3t2apu6liveqd.onion/crypt… Video 2: http://rpms63f2aaxg22kbnkqdctkvemjsk2rehilnvdxvfwy3t2apu6liveqd.onion/survi… Slides: http://rpms63f2aaxg22kbnkqdctkvemjsk2rehilnvdxvfwy3t2apu6liveqd.onion/survi… Website and videos are in the public domain.

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Microsoft, Walmart CLOs Recognized For Integrity, Creativity
by Gunnar Larson 17 Apr '24

17 Apr '24

Microsoft, Walmart CLOs Recognized For Integrity, Creativity <https://www.law360.com/fintech/articles/1825260?nl_pk=d2b3e7ef-ab62-4a62-80…> By Michele Gorman The legal chiefs at Microsoft and Walmart are among about a dozen leading corporate lawyers who soon will be recognized at the Burton Awards as "Legends in Law" for their track records of addressing complex matters and creativity in solving challenges. Read full article » <https://www.law360.com/fintech/articles/1825260?nl_pk=d2b3e7ef-ab62-4a62-80…> | Save to favorites » <https://www.law360.com/fintech/articles/1825260?nl_pk=d2b3e7ef-ab62-4a62-80…>

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Justices Face Off Over Shadow Docket Procedures
by Gunnar Larson 17 Apr '24

17 Apr '24

Justices Face Off Over Shadow Docket Procedures <https://www.law360.com/fintech/articles/1825644?nl_pk=d2b3e7ef-ab62-4a62-80…> By Katie Buehler The U.S. Supreme Court's internal disagreements over how to manage its emergency docket were on full display Monday in its decision allowing Idaho to enforce a ban on gender-affirming care for minors — a case the court's liberals said wasn't worthy of their intervention, but its conservatives touted as a win in the fight against universal injunctions. Opinion attached | Read full article » <https://www.law360.com/fintech/articles/1825644?nl_pk=d2b3e7ef-ab62-4a62-80…> | Save to favorites » <https://www.law360.com/fintech/articles/1825644?nl_pk=d2b3e7ef-ab62-4a62-80…>

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Harvard Says Antisemitism Case Not 'Legally Appropriate'
by Gunnar Larson 17 Apr '24

17 Apr '24

Harvard Says Antisemitism Case Not 'Legally Appropriate' <https://www.law360.com/cannabis/articles/1825519?nl_pk=c844ee6a-f80e-4e60-b…> By Julie Manganis Harvard University has said a lawsuit seeking to force it to submit to court-ordered monitoring and other conditions following allegations of antisemitism on campus "is neither an effective nor legally appropriate vehicle" to address the issue. Memorandum attached | Read full article » <https://www.law360.com/cannabis/articles/1825519?nl_pk=c844ee6a-f80e-4e60-b…> | Save to favorites » <https://www.law360.com/cannabis/articles/1825519?nl_pk=c844ee6a-f80e-4e60-b…>

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State Farm, HOA Settle Wire Fraud D&O Coverage Dispute
by Gunnar Larson 17 Apr '24

17 Apr '24

State Farm, HOA Settle Wire Fraud D&O Coverage Dispute <https://www.law360.com/insurance/articles/1825041?nl_pk=59612751-8689-4b1e-…> By Hope Patti A State Farm unit and a property owners association reached a conditional settlement agreement in the association's suit seeking directors and officers coverage for underlying litigation stemming from a wire fraud incident, they told a California federal court. Notice attached | Read full article » <https://www.law360.com/insurance/articles/1825041?nl_pk=59612751-8689-4b1e-…> | Save to favorites » <https://www.law360.com/insurance/articles/1825041?nl_pk=59612751-8689-4b1e-…>

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Crypto-like communication devices could break gov’t surveillance — Telegram founder
by jdb10987＠yahoo.com 17 Apr '24

17 Apr '24

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Apple Faces Two Suits Over IPhone Market Dominance
by Gunnar Larson 16 Apr '24

16 Apr '24

Apple Faces Two Suits Over IPhone Market Dominance <https://www.law360.com/competition/articles/1825216?nl_pk=6416fd97-1dc4-4e0…> By Katryna Perera Apple has been hit with a pair of suits alleging it has unfairly stifled competition in the smartphone market and that its practices and iPhone sales have violated federal securities and antitrust laws. 2 documents attached | Read full article » <https://www.law360.com/competition/articles/1825216?nl_pk=6416fd97-1dc4-4e0…> | Save to favorites » <https://www.law360.com/competition/articles/1825216?nl_pk=6416fd97-1dc4-4e0…>

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Stanford Finance Professor Anat Admati Is Making Jamie Dimon Very Nervous Again Calling His Bank Dangerous
by Gunnar Larson 16 Apr '24

16 Apr '24

https://wallstreetonparade.com/2024/04/stanford-finance-professor-anat-adma… By Pam Martens and Russ Martens: April 16, 2024 ~ The Bankers' New ClothesStanford Finance Professor Anat Admati has been valiantly attempting to save the American financial system from the corrupting influence and disinformation campaigns of men like JPMorgan Chase’s Jamie Dimon for more than a decade. Her voice is gaining traction and that’s making Dimon very nervous. Dimon has admitted in his recent letter to shareholders that his federal banking regulators want the bank to raise 25 percent more capital. Making banks hold more equity capital (as opposed to debt) is an issue that Admati has made a central focus of her arguments for years. Dimon’s bank would have a lot more equity capital if Dimon had retained the bank’s earnings each year instead of tapping those earnings to boost the bank’s stock price by using $117 billion of the bank’s earnings for share buybacks over the past decade. (Retained earnings add to a bank’s equity capital.) Dimon became a billionaire as a result of the bank’s inflated share price, because his Board gave him the bulk of his annual compensation in shares of stock. (In February of this year, Dimon cashed out $150 million of that stock.) Standord Finance Professor Anat Admati In 2011, one year before Dimon called a growing financial crisis at JPMorgan Chase “a tempest in a teapot,” Admati penned an open letter to the bank’s shareholders and published it at Huffington Post. In the letter, she wrote: “Mr. Dimon claims that higher capital requirements would increase JPM’s cost, but his reasoning is flawed. “It is critical first to distinguish capital and liquidity requirements. Capital requirements are not about what banks ‘hold.’ They do not mandate that banks passively ‘set aside,’ or ‘hold in reserve’ funds, not putting them to productive uses. Banks’ investments are not constrained by capital requirements. Capital requirements refer only to how banks fund themselves. It is investors, not the banks, who hold the debt and equity (so-called ‘capital’) claims that banks issue. Liquidity requirements, by contrast, do constrain the types of assets banks hold, and they can be costly. Capital and liquidity requirements refer to different sides of the balance sheet.” Less than two years after Admati had penned her warning about how Dimon was running JPMorgan Chase, the U.S. Senate’s Permanent Subcommittee on Investigations had concluded a nine-month investigation into how JPMorgan Chase was using deposits from its federally-insured bank to make high-risk gambles in derivatives in London. The scandal became known as the “London Whale.” The Subcommittee released a scathing 300-page report on the matter, which contained this opening paragraph: “JPMorgan Chase & Company is the largest financial holding company in the United States, with $2.4 trillion in assets. It is also the largest derivatives dealer in the world and the largest single participant in world credit derivatives markets. Its principal bank subsidiary, JPMorgan Chase Bank, is the largest U.S. bank. JPMorgan Chase has consistently portrayed itself as an expert in risk management with a ‘fortress balance sheet’ that ensures taxpayers have nothing to fear from its banking activities, including its extensive dealing in derivatives. But in early 2012, the bank’s Chief Investment Office (CIO), which is charged with managing $350 billion in excess deposits, placed a massive bet on a complex set of synthetic credit derivatives that, in 2012, lost at least $6.2 billion.” Let that sink in for a moment. Less than four years after Wall Street banks had crashed the U.S. economy in the worst financial crisis since the Great Depression of the 1930s, and just two years after the Obama administration had passed and signed into law the Dodd-Frank financial “reform” legislation, JPMorgan Chase was using deposits from its federally-insured bank to gamble in risky derivatives and lose $6.2 billion of its depositors’ money. In a rational banking system, Dimon would have been immediately sacked and JPMorgan Chase’s ability to use deposits at its federally-insured bank to make high-risk bets would have been curtailed and fiercely policed by regulators. Instead, the federal regulator of national banks, the Office of the Comptroller of the Currency, released a report on March 27 of this year indicating that at year end 2023, JPMorgan Chase’s federally-insured bank held $49.68 trillion (yes, trillion) in notional (face amount) derivatives. That included $3.89 trillion in stock (equity) derivatives; $880 billion in commodity derivatives; $1.05 trillion in credit derivatives, of which $238.6 billion were junk-rated; $246.8 billion in precious metals derivatives and so forth. Dimon’s Board of Directors, who the last time we looked were deeply conflicted themselves, not only kept Dimon in place as Chairman and CEO through the London Whale scandal, but also through the bank admitting to five outrageous felony counts and a rap sheet that rivals an organized crime family. Now, at the worst time possible for Dimon, as he attempts to bully regulators into scrapping their demands for higher capital at JPMorgan Chase, out comes Admati with an updated and expanded version of the highly readable, pristinely documented, seminal book on bank capital and the bankers’ disinformation campaign around it: The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It. The book is co-authored with German economist Martin Hellwig. In it, Admati and Hellwig write this: “The term ‘fortress balance sheet’ that Mr. Dimon loves to use conveys a sense of safety and security, the opposite of vulnerability and fragility. But if one examines the actual risks lurking around the size and type of the bank’s investments and debts, the strength of the fortress can be called into question. A closer look suggests that JPMorgan Chase is highly vulnerable and is imposing significant risk on the global financial system. “Some of the risks that make JPMorgan Chase dangerous cannot actually be seen by looking at its balance sheet because the positions that give rise to them are not included there. These are risks from business units that JPMorgan Chase might own in part or that it sponsors, and to which it has provided guarantees to serve as a backstop if they should have funding problems. These units might be full-flown subsidiaries, or they might be mere ‘letterhead firms,’ vehicles without any drivers, that are established for legal or tax reasons only. The bank’s commitments to these units amount to almost a trillion dollars, but these potential liabilities of the bank are left off the bank’s balance sheet. Yet they are quite relevant to the financial health of JPMorgan Chase.” The authors note that these same kind of off-balance sheet exposures bankrupted Enron in 2001 and required bailouts of mega banks in 2007 and 2008 from their off-balance sheet exposures to subprime mortgage debt. (See our 2008 article on the Rise and Fall of Citigroup.) Senator Elizabeth Warren said last month in a Senate Banking Committee hearing that Fed Chair Jerome Powell has become “weak-kneed” and is now “driving efforts inside the Fed to weaken the capital rule.” That leaves the Fed Vice Chair for Supervision, Michael Barr; FDIC Chair Martin Gruenberg; and Acting Comptroller of the Office of the Comptroller of the Currency, Michael Hsu, on the frontlines of the regulators’ battle to stand firm on higher capital for the mega banks on Wall Street. The future financial health of the U.S. economy and the U.S. financial system depends on these regulators not also becoming weak-kneed. Not only do these regulators need to stick to their proposed higher capital rules, but they need to immediately push for the restoration of the Glass-Steagall Act to separate federally-insured banks from the trading casinos on Wall Street.

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