Courtesy of Pam Martens
By Pam Martens and Russ Martens
The Federal Reserve Board of Governors has acknowledged to Wall Street On Parade that it has 233 documents that might shed some light on why JPMorgan Chase was allowed by the Fed to draw down $158 billion of the reserves it held at the Fed last year, creating a liquidity crisis in the overnight loan market according to sources on Wall Street. After taking four months to respond to what should have been a 20-business day turnaround on our Freedom of Information Act request, the Federal Reserve denied our FOIA in its entirety. (Our earlier request to the New York Fed resulted in the same kind of stonewalling. See The New York Fed Is Keeping JPMorgan’s Secrets Close to Its Chest.)
The Wall Street liquidity crisis forced the Federal Reserve, beginning on September 17 of last year, to begin making tens of billions of dollars in loans each business day to the trading houses on Wall Street. It calls these firms its “primary dealers” since they also engage in open market operations with the Fed and are under contract with the government to make purchases of Treasury securities during Treasury auctions, a dangerous symbiotic relationship to say the least. This was the first time since the financial crisis of 2008 that the Fed had made these so-called repo loans to the trading houses on Wall Street.
On September 17, the word “coronavirus” was unknown to most people around the world. The spread of the virus in China did not begin to make news until January of this year. Thus, the roots of the liquidity crisis on Wall Street cannot be assigned to the coronavirus, although we have every expectation that Wall Street and its minions will make every effort to do so as the history of this crisis is written – no doubt with the aid of Andrew Ross Sorkin and Paul Krugman of the New York Times.
The first coronavirus case in the U.S. to be confirmed by the Centers for Disease Control and Prevention (CDC) was reported by CNN on January 22 of this year. It had been confirmed by the CDC on January 21. But the Fed’s repo loan money spigot by that time had already pumped out $6 trillion in cumulative repo loans to the trading houses on Wall Street. And the dollar amounts of its emergency loans kept rising, as evidenced by the ongoing official statements that the New York Fed published on its website.
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