By Pam Martens and Russ Martens of Wall Street on Parade.
The Federal Reserve is desperately hoping that the pandemic, the coast-to-coast protests and the military generals’ scathing rebuke of the President’s plan to “dominate” grannies and college kids with bayonets and Black Hawk helicopters in the streets would distract the public from its money-feeding tube to Wall Street.
Unfortunately for the Fed, Americans can multitask.
Between Monday and Friday of last week, the Fed made $304.20 billion in repo loans to Wall Street’s trading houses. That was 230 percent of what it made the week before and 700 percent of what it loaned the week before that. (See chart above.) This would suggest that the liquidity crisis is heating up and/or that it’s taking ever larger amounts to levitate the stock market as sellers come back in.
The Fed has gone completely bonkers when it comes to its money spigot to Wall Street. On March 17, the New York Fed announced that it was going to be offering daily one-day loans of half a trillion dollars to Wall Street’s trading houses. That offer has been going on ever since but the daily amounts actually borrowed from the Fed have never gotten near that daily amount – thus far. The Wall Street banks that own the trading houses to whom the Fed is making the loans know that the Fed will likely be sued to release this information to the public. If they borrow too much from the Fed it will taint their reputation as a firm that was potentially insolvent or, at best, couldn’t get access to loans elsewhere.
The Fed gets the added advantage of frightening the shorts out of the market with that giant, daily, half a trillion dollars number. What short trader wants to compete against a potential daily influx of half a trillion dollars being levered up and going long.
Not only is the size of what the Fed is offering to trading houses nuts, but the interest rate is crazy as well. Never before in history has the Fed made emergency loans to Wall Street’s trading houses at 1/10th of one percent interest, as it is presently doing on its repo loans. Why aren’t we reading about this in mainstream newspapers? It’s an outrageous subsidy to Wall Street with no comparable subsidy to the public. Private student loans are running as high as 12 percent while interest on credit card debt is even higher.
The Fed can’t seriously claim to be helping families while ignoring this interest rate disparity…