Courtesy Pam Martens and Russ Martens
On Tuesday, March 30, Senator Elizabeth Warren provided the following statement to CNBC regarding the blowup of the Archegos Capital Management hedge fund.
“Archegos’ meltdown had all the makings of a dangerous situation — largely unregulated hedge fund, opaque derivatives, trading in private dark pools, high leverage, and a trader who wriggled out of the SEC’s enforcement.”
All of the elements of that statement were well known at that point, except one. No one in mainstream media at that time, or since, was talking about Wall Street’s Dark Pools in connection with the implosion of Archegos. (Dark Pools are opaque, thinly regulated trading platforms that function much like private stock exchanges operating inside the biggest banks on Wall Street. Through some twisted reasoning by the SEC, the banks are even allowed to trade shares of their own bank’s stock.)
Warren is a member of the Senate Banking Committee and would be privy to any regulatory briefings that might have occurred on the implosion of the highly leveraged Archegos hedge fund that has thus far produced acknowledged losses of at least $8 billion among Global Systemically Important Banks (GSIBs).
The Senate Banking Committee has called a hearing for May 26 and will be hauling the CEOs of the six largest banks on Wall Street to testify. (Curiously, the topics to be covered have yet to be announced.) All of the banks called to testify own their own Dark Pools except for Wells Fargo, which shuttered its Dark Pool in 2014. In addition to owning their own Dark Pools, four firms have teamed up to jointly own the Dark Pool known as EBXL Level ATS. (ATS is an acronym for Alternative Trading System which is the polite phrasing that the SEC prefers for Dark Pools.) The joint owners of EBXL Level ATS are Credit Suisse, Citigroup, Merrill Lynch (part of Bank of America) and Fidelity.
The CEOs that have been called to the May 26 hearing are: Jamie Dimon of JPMorgan Chase; David Solomon of Goldman Sachs; Jane Fraser of Citigroup; James Gorman of Morgan Stanley; Brian Moynihan of Bank of America; and Charles Scharf of Wells Fargo.
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