Open thread March 17, 2023
Open thread March 14, 2023, Angry Bear, (angrybearblog.com)
Relevant and even prescient commentary on news, politics and the economy.
Open thread March 14, 2023, Angry Bear, (angrybearblog.com)
Banks Resume Slide as Relief Over Rescue Fades
NY Times – March 17
An initial sense of relief among investors gave way to renewed concern about the health of the banking system on Friday, even after moves to shore up flailing lenders with injections of tens of billions of dollars.
Stocks traded lower, with shares of banks, including the recently rescued First Republic, resuming a slide and erasing the previous day’s gains.
The moves suggested that there is little confidence that the banking crisis has run its course. Banks in the United States also borrowed record amounts from the Federal Reserve to meet short-term needs this week, another sign of stresses in the financial system, according to recently released data.
The S&P 500 index fell slightly in early trading on Friday, with banks large and small recording declines. The smaller banks at the center of the recent turmoil were particularly hard it.
Trading in banking shares remained volatile on Friday. First Republic’s shares fell 16 percent in early trading, erasing all of the previous day’s gains. Other regional banks, like PacWest and Western Alliance, fell nearly 10 percent. Credit Suisse, which received a multibillion-dollar rescue on Thursday, also lost ground in European trading.
On Thursday, First Republic Bank, a midsize lender based in San Francisco whose stock price has cratered this month, announced a $30 billion rescue package. The bank also suspended its dividend and said it would take measures to reduce its debt.
Four storied names in American finance — JPMorgan Chase, Bank of America, Citigroup and Wells Fargo — agreed to each place $5 billion in uninsured deposits with First Republic. Goldman Sachs and Morgan Stanley, mainstays of Wall Street, pitched in $2.5 billion apiece, and five smaller regional banks added $1 billion each.
The banks, normally fierce rivals, issued a joint statement explaining their move: “America’s larger banks stand united with all banks to support our economy and all of those around us.” …
Either ‘The Market knows best’ or it is wildly over-reacting, IMO.
The market over-reacts. If you ignore trading costs, it is fairly easy to construct a winning gambling strategy based on detecting those over-reactions. Of course, trading is not actually free.
The market over-reacts. If you ignore trading costs, it is fairly easy to construct a winning gambling strategy based on detecting those over-reactions. Of course, trading is not actually free.
[ Where is a specific reference? ]
No reference, but if you use real data from prior years you can do it. Use data from before and after online trading and you will see the difference trading cost makes.
I followed such a system in the late 90s before my company realized it was allowing us no cost trades. Since I did not (and could not) have that much money in the plan, I did not get rich. And it was not long before they changed the trading rules.
I followed such a system in the late 90s before my company realized it was allowing us no cost trades….
[ Clever, clever. No matter the gain, showing this is so is important. ]
I do now note that winning means beating the market for a specific stock. If the stock tanks compared to the market, not such a good result. I don’t
Arne,
A perfect explanation. What you have importantly done here is show just how efficient Vanguard index investing is, since trading costs are minimal.
Perfect; thank you.
(Is ‘quantitative tightening’ the opposite of quantitative easing?)
Will the Fed Keep Tightening as Banks Fail
NY Times – March 17
Quantitative tightening is supposed to be boring. That’s by design.
It doesn’t demand attention like a bank failure, emergency government rescue, wildly fluctuating interest rates or uncomfortably high inflation.
But it is the most important Federal Reserve program you rarely hear about.
At its core, it involves reducing the more than $8 trillion — yes, trillion — in bonds and mortgage-backed securities held by the Fed, along with draining money from the financial system. All this shrinkage is part of the Fed’s efforts to quell inflation, which is running at 6 percent a year.
Treasury Secretary Janet L. Yellen once said the slimming process should be as dull as “watching paint dry.” Jerome H. Powell, her successor as Fed chair, said it was so straightforward that it should be on “automatic pilot” and wouldn’t merit close scrutiny.
They were both being optimistic, if not entirely disingenuous, I’d say.
Keeping the enormous asset reduction program boring in a year like this will be a remarkable accomplishment — like parading a barely tamed elephant through city traffic. At any moment, someone could be trampled.
Some damage has already taken place. It’s fair to say that the Fed’s gargantuan operation has contributed to the grave problems faced by regional banks and Treasury traders — and to the high mortgage rates that have made it difficult for ordinary people to afford homes.
Furthermore, by effectively reducing the money supply, quantitative tightening has amplified the impact of rising rates throughout the economy. And by removing the Fed as the biggest buyer of Treasuries and of mortgage-backed securities, quantitative easing has weakened these markets.
Because interest rates and bond prices move in opposite directions, quantitative tightening has cut the value of bonds on bank balance sheets. Such losses were partly responsible for the collapse of Silicon Valley Bank, the biggest bank failure since 2008. …
What Is Quantitative Tightening?
St Louis Fed – July 7, 2019
Several years ago, the term “quantitative easing” was commonplace in discussions about the Federal Reserve and monetary policy. More recently, you might have heard “quantitative tightening.”
What do quantitative easing and tightening mean? Quantitative easing, or QE, refers to policies that substantially expand the size of the Fed’s balance sheet. Quantitative tightening, or QT, refers to the opposite—policies that reduce the size of the Fed’s balance sheet. …
When Quantitative Tightening Is Not Quantitative Tightening
St Louis Fed – Feb 22, 2019
Frontline’s Easy Money
What if the Federal Reserve books losses because of its quantitative easing?
Brookings – June 1, 2022
… with the Fed now raising rates “expeditiously,” the Fed’s net interest income on its securities holdings will fall as the rate earned on the securities it holds remains relatively fixed while the interest rate it pays on its liabilities rises. The Fed has noted that if interest rates rise sufficiently high, it could end up paying more out in interest than it takes in, resulting in a loss for the Fed. …
SHOULD THE FED WORRY ABOUT POSSIBLE LOSSES IN SETTING MONETARY POLICY?
The Fed is not a profit maximizing institution. It is not a bank or a hedge fund. It is, rather, a public institution with public objectives. The Fed’s monetary policy objectives, as set by Congress, are maximum employment and stable prices. And Congress has given the Fed tools to use to foster those objectives, including the ability to control short-term interest rates and the authority to purchase Treasury and agency securities. While purchases of longer-term securities can, in some circumstances, lead to losses for the Fed, the Fed’s mandate is neither to make profits or to avoid losses. The Fed should use its tools to achieve its mandate. …
Russian attacks continue in wake of Putin arrest warrant
Widespread Russian attacks have continued in Ukraine following the International Criminal Court’s decision to issue an arrest warrant for Russian President Vladimir Putin and Russia’s commissioner for children’s rights
AP via Boston Globe – March 18
KYIV, Ukraine — Widespread Russian attacks continued in Ukraine following the International Criminal Court’s decision to issue an arrest warrant for Russian President Vladimir Putin and Russia’s commissioner for children’s rights.
Ukraine was attacked by 16 Russian drones on Friday night, the Ukrainian Air Force said in the early hours of Saturday. Writing on Telegram, the air force command said that 11 out of 16 drones were shot down “in the central, western and eastern regions.” Among areas targeted were the capital, Kyiv, and the western Lviv province.
The head of the Kyiv city administration, Serhii Popko, said Ukrainian air defenses shot down all drones heading for the Ukrainian capital, while Lviv regional Gov. Maksym Kozytskyi said Saturday that three of six drones were shot down, with the other three hitting a district bordering Poland. According to the Ukrainian Air Force, the attacks were carried out from the eastern coast of the Sea of Azov and Russia’s Bryansk province, which borders Ukraine.
The Ukrainian military additionally said in its regular update Saturday morning that Russian forces over the previous 24 hours launched 34 airstrikes, one missile strike and 57 rounds of anti-aircraft fire. The Facebook update said that falling debris hit the southern Kherson province, damaging seven houses and a kindergarten. …
The International Criminal Court said Friday that it has issued an arrest warrant for Putin for war crimes, accusing him of personal responsibility for the abductions of children from Ukraine, together with Russia’s commissioner for children’s rights, Maria Lvova-Belova.
It is the first time the global court has issued a warrant against a leader of one of the five permanent members of the U.N. Security Council. …
Arrest Warrant From Criminal Court Pierces Putin’s Aura of Impunity
NY Times – March 17
LONDON — The International Criminal Court accused the Russian president, Vladimir V. Putin, of war crimes and issued a warrant for his arrest on Friday, a highly symbolic step that deepened his isolation and punctured the aura of impunity that has surrounded him since he ordered troops into Ukraine a year ago.
The court cited Mr. Putin’s responsibility for the abduction and deportation of Ukrainian children, thousands of whom have been sent to Russia since the invasion. It also issued a warrant for Russia’s commissioner for children’s rights, Maria Lvova-Belova, the public face of the Kremlin-sponsored program that transfers the children out of Ukraine.
There is little prospect of Mr. Putin standing trial in a courtroom anytime soon. The International Criminal Court cannot try defendants in absentia and Russia, which is not a party to the court, dismissed the warrants as “meaningless.”
Yet the court’s move carried indisputable moral weight, putting Mr. Putin in the same ranks as Omar Hassan al-Bashir, the deposed president of Sudan, accused of atrocities in Darfur; Slobodan Milosevic, the Serbian leader imprisoned for abuses during the Balkans war; and the Nazis tried at Nuremberg after World War II. …
AP: … Although the court is backed by many democratic countries, including close American allies such as Britain, the United States has long kept its distance, concerned that the tribunal could someday try to prosecute Americans.
A low point came in 2017 when the chief prosecutor for the court tried to investigate the torture of detainees accused of terrorism during the George W. Bush administration. The Trump administration imposed sanctions on the court’s personnel, and the secretary of state at the time, Mike Pompeo, denounced it as corrupt.
Relations thawed in 2021 when the Biden administration revoked former President Donald Trump’s sanctions, and a newly appointed prosecutor, Khan, dropped the investigation.
President Joe Biden said Friday that he thought the arrest warrant was “justified.” While he noted that the ICC is not recognized by the United States, he said the warrant “makes a very strong point.” …
Trump Claims His Arrest Is Imminent and Calls for Protests, Echoing Jan. 6
NY Times – just in
… Prosecutors … have signaled that an indictment of Mr. Trump could be imminent. But they have not told Mr. Trump’s lawyers when the charges — expected to stem from a 2016 hush money payment to a porn star — would be sought or an arrest made, people with knowledge of the matter said. At least one more witness is expected to testify in front of the grand jury, which could delay an indictment, the people said. …
Trump says he expects to be arrested on Tuesday as New York prosecutor considers charges
AP via Boston Globe – just in
Donald Trump claimed on Saturday that his arrest is imminent and issued an extraordinary call for his supporters to protest as a New York grand jury investigates hush money payments to women who alleged sexual encounters with the former president.
Even as a Trump lawyer and spokesperson said there had been no communication from prosecutors, Trump declared in a post on his social media platform that he expects to be taken into custody on Tuesday.
His message seemed designed to preempt a formal announcement from prosecutors and to galvanize outrage from his base of supporters in advance of widely anticipated charges. Within hours, he sent a fundraising email to supporters while influential Republicans in Congress issued statements in his defense. …
What to know about the probe into Trump’s role in hush money scheme
CNN – earlier today
… The potential crimes at play
Hush money payments aren’t illegal. Prosecutors are weighing whether to charge Trump with falsifying the business records of the Trump Organization for how it reflected the reimbursement of the payment to Cohen, who said he advanced the money to Daniels. Falsifying business records is a misdemeanor in New York
Prosecutors are also weighing whether to charge Trump with falsifying business records in the first degree for falsifying a record with the intent to commit another crime or to aid or conceal another crime, which in this case could be a violation of campaign finance laws. That is a Class E felony and carries a sentence of a minimum of one year and as much as four years. To prove the case, prosecutors would need to show Trump intended to commit a crime. …
Fox News: Liz Warren, MTG agree people shouldn’t protest alleged Trump arrest
NY Authorities Prepare for Unprecedented Arrest of an Ex-President
NY Times – this a.m.
He would be fingerprinted. He would be photographed. He could even be handcuffed.
And if Donald J. Trump is indicted by a Manhattan grand jury in the days ahead for his role in a hush money payment to a porn star, the former president of the United States of America will be read the standard Miranda warning: He will be told that he has the right to remain silent and the right to an attorney.
These are among the routine steps for felony arrests in New York. But the unprecedented arrest of a former commander in chief — one whose devoted supporters once staged a violent attack on the Capitol — will be anything but routine.
Last week, senior officials from the district attorney’s office and the state agency that runs the courts had preliminary discussions to plan for a possible indictment and arraignment. So did officials from the Police Department, which patrols the streets outside the Lower Manhattan courthouse, and the court officers, who handle security inside the Criminal Courts Building, where Mr. Trump would be arraigned.
And on Sunday, more than a dozen senior Police Department officials and two of the mayor’s top public safety aides held a virtual meeting to discuss security, staffing and contingency plans in the event of any protests, one person with knowledge of the meeting said. …