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Here’s Why the Fed Hasn’t Yet Invoked Its 13(3) Emergency Powers to Stem a Stock Market Crash

Courtesy of Pam Martens

Stock Price Chart of Citigroup Versus Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley Since February 14, 2020

Stock Price Chart of Citigroup Versus Goldman Sachs, Bank of America, JPMorgan Chase, Morgan Stanley Since February 14, 2020

By Pam Martens and Russ Martens

The U.S. stock market set new records yesterday – all of them bad. The Dow Jones Industrial Average suffered its worst point loss in history, closing down 2,997 points at 20,188.52, which effectively erases all of its gains in the last three years. On January 20, 2017, when Donald Trump was sworn in as President, the Dow closed at 19,827. It’s now grown by just 1.8 percent in total over that span of time.

The Dow also had its second worst percentage loss in history yesterday, losing 12.93 percent. That loss is only exceeded by Black Monday, October 19, 1987, when the Dow lost 22.6 percent. It barely beats out October 28, 1929 when the Dow lost 12.8 percent and ushered in what would become the worst stock market crash in history. From late 1929 to 1933 the stock market would go on to lose 90 percent of its value and not reset the highs it had made in 1929 until 25 years later.

The CBOE Volatility Index (VIX), which measures implied volatility of the Standard and Poor’s 500, soared to an intraday peak of 82.69 yesterday which was even higher than on November 21, 2008 during the height of the financial crisis when one of America’s largest federally-insured banks, Citigroup’s Citibank, which had been allowed by the Federal Reserve to become an unaccountable derivatives casino, was imploding. This is what we wrote about the situation on November 24, 2008:

“Citigroup’s five-day death spiral last week was surreal. I know 20-something newlyweds who have better financial backup plans than this global banking giant. On Monday came the Town Hall meeting with employees to announce the sacking of 52,000 workers.  (Aren’t Town Hall meetings supposed to instill confidence?) On Tuesday came the announcement of Citigroup losing 53 per cent of an internal hedge fund’s money in a month and bringing $17 billion of assets that had been hiding out in the Cayman Islands back onto its balance sheet. Wednesday brought the cheery news that a law firm was alleging that Citigroup peddled something called the MAT Five Fund as ‘safe’ and ‘secure’ only to watch it lose 80 per cent of its value. On Thursday, Saudi Prince Walid bin Talal, from that visionary country that won’t let women drive cars, stepped forward to reassure us that Citigroup is ‘undervalued’ and he was buying more shares. Not having any Princes of our own, we tend to associate them with fairytales. The next day the stock dropped another 20 percent with 1.02 billion shares changing hands. It closed at $3.77.

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