Courtesy of Pam Martens
Fed Chairman Jerome Powell at Press Conference, April 29, 2020
Fed Chairman Jerome Powell had one focus and one focus only at yesterday’s press conference. That was to come across as the epitome of prudence and law-abiding virtue. Unfortunately, the cold, hard facts on the ground keep getting in the way of that narrative.
Powell first read an opening statement which included this rather remarkable statement about the trillions of dollars in emergency funding facilities that the Fed has already rolled out, or plans to roll out, to bail out Wall Street’s excesses:
“Many of these programs rely on emergency lending powers that are available only in unusual circumstances such as those we find ourselves in today. We are deploying these lending powers to an unprecedented extent, enabled in large part by the financial backing and support from Congress and the Treasury…I would stress that these are lending powers and not spending powers. The Fed cannot grant money to particular beneficiaries. We can only make loans to solvent entities, with the expectation that the loans will be repaid.” (Italic emphasis added.)
The truth of the matter is that the Fed has adopted the mindset of Wall Street: it’s legal if you can get away with it. The Fed didn’t start its emergency programs as a result of the coronavirus COVID-19 pandemic as Powell suggests in the statement above. It started these programs on September 17, 2019 – three months before the first case of the virus had been announced anywhere in the world. That emergency action occurred when Wall Street banks refused to lend to each other in the repo loan market – just as they had in the financial panic of 2008.
The Fed didn’t officially invoke the emergency lending section of the Federal Reserve Act known as 13(3) for its repo loans, it simply made more than $9 trillion in super cheap loans to the trading houses of Wall Street over the next six months and refused to provide the names of the firms to whom the money went, leaving the public and shareholders in the dark as to what firm(s) was in trouble and getting a bailout.
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