Yes again...
Trump's Treasury secretary wants to use the worst liquidity crisis since 2008 as an excuse to ease lending standards at the end of the cycle. Actually JP Morgan wants it, he's just doing their bidding...
Trump's Treasury secretary wants to use the worst liquidity crisis since 2008 as an excuse to ease lending standards at the end of the cycle. Actually JP Morgan wants it, he's just doing their bidding...
What any super idiot would do right now:
"US Treasury Secretary Steven Mnuchin is open to loosening bank laws meant to create buffer reserves in case of financial crisis"
Senator Elizabeth Warren penned a letter to Mnuchin warning him not to relax the bank laws:
"These rules were designed to ensure that banks have enough cash on hand to meet their obligations in the event of another market crash. Banks are reporting profits at record levels, and it would be painfully ironic if unexplained chaos in a small corner of the banking market became an excuse to further loosen rules that protect the economy from these kinds of risks."
Record banking profits are precisely why liquidity is collapsing right now. Banks have all of their money tied up in illiquid "assets" that are becoming more illiquid by the day. It's THAT point in the cycle.
"To increase profits, banks have focused on risky assets with higher returns. "Because banks have not shed some of their riskier assets, they don't have the liquidity they need," says banking regulation consultant Mayra Rodriguez Valladares. "Bankers are constantly talking about how they're private companies and shouldn't have such regulation. But they're wayward teenagers and want Daddy Federal Reserve to save them."
Like everything else around here, this problem was not resolved, it was merely hosed away with massive amounts of liquidity:
"Federal Reserve Chairman Jerome Powell says short-term interest rates are back under control. Not everyone’s convinced.
There’s evidence traders expect pressure to build in the weeks ahead. Brokers on Thursday are quoting repurchase-agreement rates for year-end around 3.25%, or roughly one-and-a-half percentage points higher than today’s levels, and they’ve mostly been above 3% for months. That’s even after Powell’s attempt to reassure markets on Wednesday and the central bank’s announcement Thursday of its latest round of liquidity injections, some of which will span the end of the year."
The Fed doesn't have anything under control.
Control is a low volume casino illusion right now. Emergency Fed liquidity generated this end of year asset melt-up which "forced in" Wall Street to dump their hedges and join the party. It was a roundtrip from 20 year high pessimism to 20 year high surge in optimism, in just TWO WEEKS. All because the Fed was hosing down a liquidity problem caused by banks onboarding too much risk at the end of the cycle.
We've seen this movie before - liquidity used as a proxy for solvency. UNTIL such time as liquidity locks up.
And then all of a sudden the music stops.
What is truly ironic, is that it's the Fed's liquidity injections that are creating this fake reflation spike, driving up bond yields, and imploding the bond market:
Remember the "Momentum Massacre" in early September, caused by the massive rotation from momentum to value?
It's about to begin third wave down:
