Courtesy of Pam Martens
A.G. Sulzberger, Chairman and Publisher of the New York Times
On October 13, Wall Street On Parade broke the story that the Federal Reserve had quietly released the names of the mega banks that had grabbed tens of billions of dollars of repo loans under the Fed’s emergency repo loan operations that began on September 17, 2019 – months before there was a COVID-19 case in the United States or anywhere else in the world.
Repos (repurchase agreements) are a short-term form of borrowing where corporations, banks, securities firms and money market mutual funds secure loans from each other by providing safe forms of collateral such as Treasury securities. Repos are supposed to function without the assistance of the Federal Reserve. But on September 17, 2019, the oversized demand for the repos and the lack of available funds to meet the demand drove the overnight interest rate on repo loans to an unprecedented 10 percent at one point. Typically, the overnight repo rate trades in line with the Federal Funds rate, which was at that time targeted at 2 to 2.25 percent by the Fed.
The newly released data from the Fed showed that three of the largest borrowers during the repo crisis of September 2019 were the trading units of Nomura (a Japanese firm), Goldman Sachs and JPMorgan. The Fed had been heavily criticized after a government audit of its secret loans during the 2008 financial crisis revealed that tens of billions of dollars went to foreign banks. Why was a Japanese firm at the top of the list this time around? Why were U.S. mega banks Goldman Sachs and JPMorgan on the list at all? Fed Chair Jerome Powell had consistently testified to Congress that these banks, which the Fed supervises, were well capitalized and a “source of strength” heading into the pandemic.
There had been major speculation by corporate media in the fall of 2019 when the Fed launched these emergency repo loans as to which financial institutions might be in trouble. One would have thought that the same corporate media would have been anxious to learn the names of the banks that borrowed and share the breaking news with their readers. Imagine our surprise when the story was censored by every major business media outlet.
On Friday, we emailed the business editors of the Wall Street Journal and New York Times, asking why they would fail to publish such an important story. We gave them more than 48 hours to respond. There was no response.
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