Fed’s Balance Sheet Spikes as “Everything Bubble” Morphs into Financial Crisis 2

Drags out bailout creature from Financial Crisis 1: “Loans” to Primary Dealers.

By Wolf Richter for WOLF STREET:

Total assets on the Fed’s weekly balance sheet, released Thursday afternoon, spiked to a record $4.67 trillion, up by $508 billion since the balance sheet of February 26, by which time all heck at already broken loose in the financial markets. Since the beginning of the repo market blowout in mid-September, total assets have ballooned by $900 billion – a result of a series of efforts to bail out first the repo market, and since the end of February, the Everything Bubble that had started imploding.

During the seven-week period between the repo market bailout (QE-4) which ended on January 1, and the Everything Bubble Bailout (QE-5) which commenced with the February 26 balance sheet, the Fed backed off QE (circled):

It’s as if the QE unwind – that drop-off in assets from early 2018 through July 2019 – had never happened. And the steepness of the new spike shows just how panicked the Fed is about the suddenly collapse of its super-bloated masterwork, the Everything Bubble that it had spent a decade inflating.

Total assets on the Fed’s balance sheet are composed mostly of overnight and term repos, Treasury securities, which include short-term Treasury bills (T-bills), mortgage-backed securities (MBS), and a newly active item, “Loans.” If the Fed gets authorization from Congress to buy old bicycles as well, they will show up as a separate line item.

The newly active bailout creature of “Loans.”

During Financial Crisis 1, the asset account “Loans” contained large balances. When the turmoil settled, those loans were paid back and the balances have since hovered close to zero through last week. But this week, this account jumped from zero to $28 billion – and this will likely soar, and we will keep our bailout eyes on it going forward.

This “Loans” account tracks the amounts the Fed has created and lent out as part of its new bailout liquidity programs. All of the $28 billion was lent to the Fed’s “Primary Dealers,” which are 24 large broker-dealers and banks that are the approved counter parties of the New York Fed. The majority are US operations of foreign financial institutions (highlighted):

  • Amherst Pierpont Securities LLC (added to the list in 2019)
  • Bank of Nova Scotia, New York Agency (Canada)
  • BMO Capital Markets Corp. (Canada)
  • BNP Paribas Securities Corp. (France)
  • Barclays Capital Inc. (UK)
  • BofA Securities, Inc.
  • Cantor Fitzgerald & Co.
  • Citigroup Global Markets Inc.
  • Credit Suisse AG, New York Branch (Switzerland)
  • Daiwa Capital Markets America Inc. (Japan)
  • Deutsche Bank Securities Inc. (Germany)
  • Goldman Sachs & Co. LLC
  • HSBC Securities (USA) Inc. (UK & Hong Kong)
  • Jefferies LLC
  • P. Morgan Securities LLC
  • Mizuho Securities USA LLC (Japan)
  • Morgan Stanley & Co. LLC
  • NatWest Markets Securities Inc. (UK)
  • Nomura Securities International, Inc. (Japan)
  • RBC Capital Markets, LLC (Canada)
  • Societe Generale, New York Branch (France)
  • TD Securities (USA) LLC (Canada)
  • UBS Securities LLC. (Switzerland)
  • Wells Fargo Securities, LLC

These Primary Dealers are the recipients of much of the bailout funds, and they also sell Treasury securities and MBS to the Fed. They’re the primary transmission channel of much of this Everything Bubble Bailout. And now, in addition to the other facilities, they’re getting direct loans under the Fed’s new liquidity programs whose proceeds they’re obligated to channel as directed by the Fed’s bailout programs.

Repos spike to high heaven.

Total repurchase agreements outstanding on the Fed’s balance sheet, after plunging by 44% from January 1 through February 26, have since tripled to an all-time record of $442 billion:

The Fed is offering one-month and three-month repos of $500 billion each, twice a week, plus overnight repos of up to $500 billion, plus two-week repos, plus repo extravaganza galore or whatever.

But most of the repos are now by far undersubscribed. The Fed is essentially offering unlimited supply of cash under these repurchase agreements, far more than the counterparties can or are willing to take.

Repos are in-and-out transactions. An overnight repurchase agreement unwinds the next day: The Fed gets its money back (plus a little interest), and the counter party gets its securities back. One-month repos unwind after one month, etc.

Treasury securities spike, but T-bills flatten

The Fed has restarted purchasing Treasury securities of all kinds (including TIPS and FRNs) and all maturities. But within that group, the growth of T-bill balances, which had been soaring at a rate of about $60 billion a month since the repo market blowout, has now stalled. Over the past week, the T-bill balance remained flat, with the Fed only buying enough T-bills to replace maturing T-bills.

But the balance of all Treasury securities, of all types and maturities, ballooned by $118 billion in just one week, and by $560 billion since last August, to an all-time record of $2.64 trillion:

And MBS? It gets complicated.

The Fed – after shedding mortgage-backed securities at a rate of about $20 billion a month for most of last year and through early March this year, amid vows to get rid of them entirely and be done with them forever – announced that it would restart increasing its balance of MBS again, in good old QE fashion.

However, MBS are complicated creatures with pass-through principal payments and long lags until transactions settle. Since the Fed puts its new MBS on the balance sheet when the transaction settles, the purchases this week of MBS are not yet showing up on the balance sheet, and the balance of MBS declined at tad to $1.37 trillion, driven by pass-through principal payments, to the lowest point since October 2013:

And this was just the first week of QE-5 that the Fed had announced in panic last Sunday afternoon, amid plunging markets, along with its one-percentage-point rate cut to near zero, and other measures. Clearly, it’s trying to get a grip on Financial Crisis 2 before it completely wipes out the formerly splendid Everything Bubble that the Fed had spent a decade inflating.

Frazzled by the sudden appearance of Financial Crisis 2, the Fed scurries in every bailout direction. Read… Junk-Bond Spreads & BBB-Bond Spreads Blow Out Past Lehman-Bankruptcy Levels

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  188 comments for “Fed’s Balance Sheet Spikes as “Everything Bubble” Morphs into Financial Crisis 2

  1. 2banana says:

    So the Fed is basically bailing out the world?


    It’s all madness.

    “All of the $28 billion was lent to the Fed’s “Primary Dealers,” which are 24 large broker-dealers and banks that are the approved counter parties of the New York Fed. The majority are US operations of foreign financial institutions…”

    • A says:

      The FED works for the global billionaire class, not the US citizen. The president is a member of the global billionaire class. The media is all owned by the global billionaire class.

      They’ve got us by the balls from every direction. And only Wolf still tells the truth.

      • Frederck says:

        Along with a few others but I appreciate greatly what Wolf does

        • joe saba says:

          see article were they bailed out hedge funds that were leveraged 20-50:1 on treasuries(ie interest rate derivatives)
          only trillion here, trillion there

      • GMac says:

        Fuggn A!

        Its a helluva battle fighting the ever-spinning propaganda machine.

        Thank the lordy for Wolf!

      • Jonas Grimm says:

        Until they realize that they too die of bullets, the billionaires will continue to neglect us to death.

        Someone should remind them.

    • HD says:

      As a EU citizen I’m inclined to say: that is one of the major disadvantages for the country with issues the world reserve currency.

      See what happens to the USA if they were to lose that privilege and believe me, I’m saying this without any Schadenfreude, because we will all be suffering.

      But I basically agree: at this point, it’s all madness.

      • Frederick says:

        We are going to lose the reserve currency privilege It’s just a matter of time now No nation HS ever held it forever in history so why would this time be any different?

        • kam says:

          Of course it is Monetary Madness. Pumping air into an ever-leaking tire. But using the reserve currency privilege also requires the huge responsibility of keeping the system whole.
          While it may come to pass that the Reserve Currency Privilege expires, the alternative to the U.S. dollar is a long, long way back in the dust somewhere.
          Every other currency is in far, far worse shape. Hard to believe but true. The Euro? A continental joke. The Yen? The original Mad Hatter. The Yuan? Yeah, sure pal, without the U.S. dollar being pegged to the Mighty Mouse Yuan, the USD would have collapsed years ago.
          What a belly laugh.
          And whoever suggests using Special Drawing Rights fails to understand that SDR’s are mainly supported by the U.S. dollar. Even the Yuan in the SDR basket is another joke. What other serious country on the planet needs to peg it’s little currency to the USD, yet for political show is allowed in as a basket currency.

    • historicus says:

      The Fed people were saying just a few months ago..
      “We need a larger balance sheet because the economy is so much larger now.”
      This of course begs the question, “how did the economy get so large without a large enough balance sheet?”
      And now with the crisis, the Fed people say, “We need a larger balance sheet to deal with the crisis.”
      Therefore, whether times are good or bad, we need a larger balance sheet. (According to the Fed) Got it?
      Now the Fed is engaged in exactly what they should be doing, systemic rescue.
      BUT, why did they have all the “happy buttons” in the “on” position at record highs in the stock market and record low unemployment?
      To have done so was fluffing the pillow when the pillow didnt need fluffing. They exacerbated the current situation with their irresponsible actions the past year (at least).
      Sadly, central bankers will accrue more power, will micro manage markets even more, self author new mandates, and will pick winners and losers. There is no job performance review, apparently.

      • historicus says:

        BOJ balance sheet equals or exceeds their annual GDP.
        Seeing that we seem to follow their lead, for reasons unexplained, our balance sheet will take on 14 Trillion. But with the decline in the GDP forecast, perhaps the nexus occurs at around 12 Trillion in GDP and balance sheet assets.

      • sierra7 says:

        To all for now:
        “Failure” for the FED is NOT an option….!

    • Dink Singer says:

      Foreign broker-dealers are primary dealers because foreigners buy a big share of Treasury securities.

      The world has been financing the U.S. for quite awhile. The Treasury, the New York Fed and the Federal Reserve Board jointly survey foreign holding of U.S. securities and the Treasury releases semi-annual reports. The most recent report, shows as of June 30, 2019, foreigners held 42.6% of marketable Treasuries, 28.7% of U.S. corporate debt securities and 14.0% of U.S. equities.

      In times of financial crisis, the flight to safety brings even more foreign funding into U.S. Treasuries. In 2008, the percentage of foreign ownership grew to 60.8%. That increase in foreign ownership generated the enough funding to finance the TARP programs.

      Of course Americans also make investments in foreign securities, but the amounts are much smaller and the investments are concentrated in equities.

  2. Bobby Dents says:

    Could care less about the Fed. They aren’t getting any bids. Your obsession with the Fed shows me you have not learned a thing. The distressed paper in this case is outside their purview. That is why they are begging for Federal bailouts which are hitting snags as expected.

    The Fed’s balance sheet is irrelevant and always has been outside a prime crash like in 2008. This also means you could dump its balance sheet and nothing in general outside a initial panic by morons…….would happen.

    • Wolf Richter says:

      Good lordy. A good dose of nonsense. But I agree with you on this, and I think you nailed it: there is a lot of distressed paper, and it won’t just go away.


      • Galts Gulch says:

        The FED is the buyer of last resort. Why should’t/couldn’t the FED continue to buy to infinity?

        Were not even to Qaud-drillions, yet or septillians, we’re still in the trillions

        There are no bids, because good money will not accept near zero ROI,

        Cantillions law, good money goes away, bad money floods the country.

        I just want the interest rates to return to the natural ROI; What’s it been now with low interest rates? Decades?

        Sure this game can continue, but you all know what will happen, everything can&must be nationalized, because its the only way to prevent everything from being shutdown. Normal men who own the means of production, will naturally just retire, and get on with their lives, rather than make product for no ROI.

        We all know that the titans of industry have kept the machine running since 2008, because share-buybacks that lined their pockets, where be the incentive now?

        Normally it would be a perfect time to flee to that Italian Estate, but the problem now is you can’t find a plane to take you there, same with Argentina and all the “Galts Gulch” on earth. I knew it would be this way, too many people didn’t get out of dodge early, they all waited to maximize the grift, now they’re stuck in hell, with all the worthless money in the world.

      • sierra7 says:

        Mr. Richter:
        Yes, you nailed it….
        That has always been my concern since ’09.
        That paper is smoldering and sparking!
        It’s like a manure pile: the longer it sits without being “turned over” the hotter it gets (and the more it stinks!)!

    • Iamafan says:

      They aren’t getting any bids.

      The funiest line I heard today. It’s near free money.

      • al says:

        I mean, the Westerners do wipe their butts with paper, whereas the Thai use water.

        But at the end of the day, how many people of any stripe are actually washing their hands.

      • Wisdom Seeker says:

        It would be more funny if the Chinese and American politicians weren’t also pointing fingers in order to deflect incoming blame from irate local constituents.

        Plenty of ire being hurled at Italy too.

        Seems to me that no one in their right mind would have unleashed this on the world, and there are shocked humans in all nations who have been suffering about equally from denial and cluelessness in the face of a threat, that until 3 months ago, was only something you’d find in history books.

      • Frederick says:

        You can blame a lot of things on Caucasian’s in Thailand ( and Asians too) but Covid isn’t one of them

      • MaggieD says:

        How long before that virtual fucking machine in Demolition Man becomes reality, in a world awash in aggravated escalation of ethnocentrism and “nationalism” racism?

      • historicus says:

        I find it ironic and important…
        The Fed drives interest rates to historical lows, and there are complaints that the bond market is broken and that the Fed is the only buyer.
        Apparently the Fed is the only one believing in the “reality” they manufactured.
        No one want to lend at ridiculously low rates and the market is broken? I think the market is telling the Fed that the Fed is broken.

      • Dink Singer says:

        Yes, it is nearly free, but it is not free. You don’t pay for money unless you can use it. Of course they are getting bids, but the amounts the Fed is offering are so big that the bids seem tiny. The Fed is offering $1 trillion in overnight repos every business day. On Friday, $23.75 billion in bids were received. Interestingly the Fed also had $12.203 billion in bids for reverse repos where, in effect, it borrows money. The rate on that money was zero but it was not quite free because there are some processing costs.

    • Cruiser says:

      Monetary distortions, which are the fundamental force fomenting financial bubbles followed by inevitable financial collapse, are born of central bank accommodation and credit expansion via fractional reserves/mismatching of maturities within the financial system itself. During a financial collapse the financial system deleverages reversing credit expansion and central banks are the only entity left to reflate the system. If central banks fail to act a deflationary collapse results (e.g. the Great Depression). So focusing on the Fed when evaluating financial cycles makes perfect sense, particularly during a financial collapse.

      Note, central banks have now hit the zero bound on rates so they can no longer foment a new financial mania by misleading investors and consumers via manipulation of the most important set of prices in an economy, rates of interest. Consequently we are now going to witness decades of monetary distortions being wrung from the system. With all currencies fiat central banks will debase currencies at a rapid rate, which is the point of Mr. Richter’s article, but we can expect that to be neutralized by price inflation this time. We are headed for an inflationary secular financial collapse.

      Tangible assets can provide refuge for some but somebody must hold all the paper all the way down, which means most everyone, so most people will see their wealth vaporize in inflation adjusted terms during this multi year process.

      • Nasty Edwin says:

        So Wrong!

      • historicus says:

        Crusier. You are right on the money.
        The Fed, prior to this debacle, declared that they self authored an inflation mandate that RIPS 22%-28% off the dollar in just ten years (2-2.5% inflation) yet they say they are still for stable prices, and not a question from a reporter or Congressman.

      • The Colorado Kid says:

        Cruiser, deflation MUST follow this “everything bubble” as sure as winter must come after summer.
        Look to Japan to see what happens when you absolutely refuse to allow a deflationary reset & cleansing. You will end up with a Zombie Economy, neither alive nor dead, otherwise.

    • historicus says:

      Does the Fed think ANYTHING is outside their purview?

    • cb says:

      Don’t look now, but the FED has been a prime contributor to distressed paper.

  3. Wisdom Seeker says:

    The Fed’s actions won’t stop all the state governors from decimating businesses with shelter-at-home restrictions. Seems like what most businesses – and people – need is just enough cash (or credit) to tide things over for a couple of months. Hopefully the Fed’s actions will help prevent marginal companies from needlessly going under.

    If not, unemployment is going to get stuck “high” again, like after 2008. And as for stocks, they’ll have to rename it the DOWN JONES Industrial Average…

    • Mike says:

      The three state governors who so acted are the leaders who are actually competent; thank god for them. Greater panic and economic decimation will occur in other states when thousands of younger people also start dying in hospitals, or dropping dead/unconscious on streets, because there are not enough hospital beds, ventilators, oxygen bottles, etc.

      Without enough testing, tracing, and quarantining now possible in many states, lock-downs are the only reasonable option, thanks to this administration.

      • TXRancher says:

        Oh give me a break.
        Young people are not “dying in hospitals, or dropping dead/unconscious on streets” anywhere in the world. Panic talk is worst than the Wuhan virus.

        • Wisdom Seeker says:

          He didn’t say “young people”, he said “younger”, meaning not nursing-home cases.

          And yes, it is happening right now, in northern Italy. And it happened 6 weeks ago in Wuhan.

          And regions that don’t start serious social distancing soon will find themselves copying those two bad examples.

        • WES says:


          Today I saw a pie graph showing 69% of US people hospitalized because of the coronavirus were under 65 years old!

          34% were under 45 years old!

          65 years and up only 31%!

      • MCH says:

        So instead of Boomer Remover, we get Millennial Denial?

        As for those governors, well, they do have more to worry about given the population in their states.

        Could Newsom short the market through his blind trust? :P

      • Michael says:

        You are apparently devoid of math skills and common sense

      • rhodium says:

        The right thing perhaps, but that doesn’t negate that in an economy that pushes everything to the edge that it won’t cause some destruction. Rarely will you find a budget padded with some safety. A lot of businesses are going down over this and jobs with them. Supply and demand dance back and forth with each other. They both take incremental steps forward as the economy grows. If you knock one on its feet they both go down, and it’s going to take time for them to shuffle back forwards.

        But! How much in this cycle has demand been propped up by debt. That’s the crutch. If the credit extension machine shuts down, and it looks to be, then that is going to throw down the economy all the harder. Low interest rates are the fed’s favorite stimulus that doesn’t really do much for consumers anyway (but you can still try!), so let’s see how that works for them in the short-term. This past cycle I thought it was just desperation for yield driving the thirst to throw money after zombie corps and cash drains. It took awhile for that insanity to get fully rolling so I don’t really expect the additional money supply will juice the markets much over the next 6 months. And might I add that in 10 years quadrupling the money supply barely touched wages so if the Fed quadruples again I find it likely that it still won’t eliminate newly high unemployment.

      • historicus says:

        Pritzker competent?
        He flies back and forth to FL to do his press conferences, as the state is on the brink of bankruptcy.

        • Lisa_Hooker says:

          historicus – perhaps you are suffering from Lear-Gulfstream syndrom. It is becoming more and more common. Fortunately it is rarely fatal.

      • historicus says:

        “The three state governors who so acted are the leaders who are actually competent;”
        maybe so….in this regard…still to be determined.
        May we notice they are all Democrats, and their states are all broke?

    • 2banana says:

      The governor of Pennsylvania just ordered all coal mines to shut down.

      Besides destroying your state’s economy, how does this even help in the tiniest bit?

      • rvette454 says:

        2banana, the virus may mutate again and spread by different means, longer time outside a host, higher fatality rate, other age groups and health conditions may spike. This virus has no comparison to previous pandemics. In short it was transferable from animal to animal for a undetermined time, research is not as defined or applied, in January the virus mutated and became animal to human contact, within 2 weeks the virus again mutated to human to human contact. Science doesn’t know if and when another mutation can occur, and it has little previous study to predict. That’s what has been held back in media and government announcements, probably to reduce the panic mode somewhat.

        • Dave says:

          The virus also attacks both the upper respiratory system and the lower respiratory system. Most virus attack one or the other. In the respiratory ICU I work in we can employ treatments which recruit the unaffected part of the lungs to compensate for the compromised portion of the lung.

          This aspect of the virus is what makes it so scary. The pulmonologists I work with are very, VERY afraid of this virus.

        • rvette454 says:

          I would say the rebound will be much longer then some presume, the virus could be eliminated with a vaccine and social distancing.. that in itself has a year or more prediction. The rights and freedom some suppose are lost need to be thought provoking.

        • Martok says:


          I agree with you and science doesn’t know when or how another mutation will occur. The animal to human transmissions is a horrific scenario, and we maybe fighting this for many years, there are more mutated corona-viruses outbreaks that will occur.

        • Michael Church says:

          It could mutate to be less infective and a lower fatality rate – we just don’t know. Mutations will occur as they do in all viruses. You are making some assertions as if they are factual when they are not.

        • Lisa_Hooker says:

          I await the human to liberal/progressive mutation.

      • mike says:

        All jobs that require close contact put employees at risk of infection, particularly given the shortage of protective equipment. Most importantly, too many medical providers are being infected: without proper care, survivable cases may become fatal.

        A national lock down of 30 or more likely 60 days would solve this epidemic, if travel were cut off, except essential travel. It would burn out mostly. Tracing after testing and quarantines for all contacts would then work again– now there are too many cases for that in many states.

        • Thomas Roberts says:

          A quarantine to burn out this virus, could have only worked in Wuhan at the very beginning. The CCP knew about it since at least early December, they covered it up for over 6 weeks by then it was too late. The outbreak never stopped in China, they are just lying about it.

          In order for a quarantine to work in America we would have to close down Mexican border for real, cancel all international flights and then repeatedly test EVERYONE in America to have a chance. We lack the pharmaceutical capabilities to pull that off.

          Our only options are to isolate those who be most affected “my preferred option” or to isolate everyone. Until, a vaccine is made. If a vaccine cannot be made”unlikely but possible”, then you have to let enough people get infected to develop herd immunity.

      • A says:

        It stops one miner from infecting all his co-workers. Then all those workers go home and infect their families.

        One mine could grow to 1,000 infections and dozens of deaths.

      • Shiloh1 says:

        Agreed, and the coal would be needed for the few of those power plants still around. And what if some nuke power plants need to be taken off line because of staffing issues.

        • Mike says:

          Some coal mining is still necessary for essential powerplants, but fortunately, we have mostly moved on from coal. A!l power plant fuels, like natural gas, must continue to be produced, of course.

      • rhodium says:

        The miners will now have time to write eulogies for half a million Americans.

        • MaggieD says:

          In almost bathos Shakespearean tragicomedy, many of those coal miners will use the time to praise Typhoid Donnie’s “war presidency” leadership….

      • NJGuy says:

        The miners will be able to learn to code.

    • Gordian knot says:

      Two months would be optimistic. Friends in the military received a notice estimating August. That would be in line with what credible epidemiologist have estimated. 9months for a pandemic to work its way around the world.

      • Lisa_Hooker says:

        This August is reasonable for a lull in infection. That gives us low rates of infection in September and October this year before it takes off again in November for the 2020-2021 flu season. We may have a vaccine available in March 2021, or perhaps August 2021, or perhaps later. This will be an interesting year.

    • Paul Easton says:

      I wouldn’t want anything valued in fiat money. I would want to hold Consumer commodities. Food is easy. Try to diversify with sex drugs rock and roll. Hold actual rock, but not too much.

  4. VintageVNvet says:

    Liking the Down Jones, WS,, but maybe not enough?
    Maybe, ”down to davy jones??
    All seriousness aside Wolf, what’s your current opinion regarding these various moves by the FED and we must supposed Treasury and the politicians causing inflation, and when?

    Thank you both for your wit and applied Wolfer wisdoms.

  5. Gershom says:

    The Federal Reserve cue card:

    Step 1: Create fake money stealing value from everyone

    Step 2: Loan the fake money to people with interest

    Step 3: Take people’s stuff when they can’t repay the debt

    Step 4: Get government to enforce our fraud

    Step 5: Plunder humanity

  6. Gershom says:

    The Keynesian fraudsters at the central banks have lost control.

    • Groucho says:

      Invoking Keynes’ in this context just shows that you know nothing about his economics.

    • historicus says:

      Even Keynes knew there was a point where stimulus and deficit spending ceased to be beneficial, became ill advised, and should be withdrawn.
      The Fed and central bankers of the world didnt subscribe to that chapter.

  7. Joe Banks says:

    I think 2% of USA population knew what was coming regarding this bubble, most had/have no clue or didn’t care or were complacent. This is no surprise to me, my issue now is that they (govt) will use this crisis as a way to take away our freedoms. Yes Wolf that’s still remains my number one issue. We are peons in a world controlled by big business and big government. We have evolved into a centrally planned economic system where the losses are socialized and profits privatized. California last year had an opportunity to vote down the gas tax, they didn’t. California/USA this is what you wanted and voted for, now will pay consequences. Finally, California has the 5th largest economy by GDP in the world. This will be bad.

    • GEOFF says:

      I am not clear why Californians voting down the Gas Tax is good or Bad. I live here, on the Monterey coast, and I have never heard one Californian complain about the Gas Tax. Seriously! Now tourists from Texas keep telling they wouldn’t live here, blah blah, blah… we we take their tourist money every year so I am just not sure living in California just doesn’t make it all worth it.

      • jon says:

        I live in CA and I didn’t support gas tax. Honestly, the tax rate in CA is too high…

        • Zantetsu says:

          I live in CA and would be fine with higher gas taxes. I have previously lived in countries with even higher gas prices than California. I think we overconsume gasoline through gross inefficiency.

        • Gordian knot says:


        • Wolf Richter says:

          I live in CA and I don’t feel the gas tax personally since I walk most of the time.

          But my wife drives to work and she might care, but not really since she’s Japanese, and gasoline in Japan is like multiples more expensive than here.

          Plus, we just bought a hybrid that gets 41 mpg in our experience and calculations, and we got rid of our 18 mpg sports sedan, and so she’s happy. Her gasoline expenses dropped by more than half.

          And thereby we cut the amount of gasoline taxes that we pay by more than half, tax dodgers that we are :-]

        • MCH says:

          The truth is, gas taxes in CA really depend on each individual’s personal finances and economic situations. As I’ve pointed out before on numerous occasions, it is really odd how some of the more “progressive” policies in CA tend to penalize those who are least able to afford it, because they are stuck driving to work. And how it favors the rich, such as solar panel and electric car credit up until the point the masses are able to afford those newfangled toys… then the subsidies go away… because we accomplish the “environmental goals.”

          Except the the need to keep punishing people who aren’t as economically advantaged by making them pay the extra gas tax.

        • Zantetsu says:

          MCH, every single cost of every single thing is like that. It makes no sense to allow people lower on the socioeconomic spectrum to destroy the environment just because they can. All of us can use less gas, ALL OF US, including the poor.

          I mean property rights are anti-progressive too because poor people would benefit more from stealing than rich people. So by your logic we should just allow them to steal.

        • MCH says:

          @Zantetsu, yep, and thus we have such wonderful mass transit options in CA… the high speed rail for example is wonderful… Right?

      • Ed says:

        Texans say the same thing in Texas, a lot, and especially the politicians. The pols act as though California is Hell on Earth.

        It’s good politics in Texas, but I don’t like it. As a military kid, I’ve lived all over the U.S. Every place has it’s virtues.

    • Cruiser says:

      Political consequences of the inbound secular financial collapse are the scariest issue of all long term, even for those who have taken action to protect their wealth.

      My answer is to live on a sailboat…may have to head somewhere seriously remote at some point, unfortunately.

    • flashlight joe says:

      “California last year had an opportunity to vote down the gas tax, they didn’t.”

      s a minor aside, I am constantly amazed that people always object to specific minor taxes, yet everyone is complacent with the federal income tax on our wages, salaries, and tips.

      What gives?

  8. Noelck says:

    Until the Coronavirus cases peak in the US and a few of these companies go bankrupt we will not know the amount of damage the Fed has inflicted. They can’t possibly print enough money to bail everyone out can they? If they do it will be disastrous.

    • historicus says:

      In 2008, when the last Fed rescue began, Fed Funds were circa 4%, and the balance sheet was 850 billion.
      Now we start at 4.5 Trillion and .25% Fed Funds….and the corporate tax cut bullet has been shot.

      • Lisa_Hooker says:

        Reminds me of my favorite Bernie slogan: ” Free stuff for everybody, all the time.”

  9. qt says:

    Janet “Felon” Yellan doesn’t see crisis in our lifetime.


    Fed and Central bankers have eliminated all recessions.


    Remember this: “Trees don’t grow to the sky”

    “If Something Cannot Go On Forever It Will Stop”
    – Herbert Stein

    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
    -Upton Sinclair

    • historicus says:

      Janet, like all the central bankers, are not only unelected, but they are immune from the ill effects of the policies they dictate to us, because they have inflation protected pensions awaiting them, courtesy us….but what of us?
      She meant “She” wont have a crisis, nor will Bernanke.

    • Lisa_Hooker says:

      QT – you forgot “This time is different.”

  10. QQQBall says:

    I was thinking of land-filling my old couch and getting a new one. Maybe the FED will take it as collateral ?

    • Bob Hoye says:


    • Bob Hoye says:

      And then there is the very old quip:
      She was only a second-hand dealer’s daughter, so she wouldn’t allow much on an old couch.

    • GotCollateral says:

      I have a lot more used toilet paper on hand, maybe they’ll accept it as well, and wont mind if i repo fail on that everyday and keep the cash

  11. pirate says:

    douche bank down another 2 and half % on the day market cap only 12 billion and change holding up trillions in derivatives.

    when you double your exposure to a CLO your risk doesn’t double it increases by a factor of 10 to 100…

  12. David Hall says:

    The Fed has been working to support money market funds. This type of operation has been welcomed in times past.

    Janet Yellen warned about excessive levels of corporate debt in 2018 and 2019. This might cause problems whether the epidemic ends soon or not. Some of these companies might be liquidated.

    • Wisdom Seeker says:

      Janet may have warned – but she didn’t do anything with her powers of “macroprudential regulation” to put a stop to it. What, you mean you hadn’t heard that the Fed has massive regulatory authority over the banks? Because they never use it when it would do real good.

      (But you can at least see what they did to Wells Fargo in their fake-account scandals… Not that that was bad, but they should have done so much more…)

      • Unamused says:

        Janet may have warned – but she didn’t do anything with her powers of “macroprudential regulation” to put a stop to it.

        She tried nothing and was fresh out of ideas. But she did manage to excuse herself.

        The Fed knew what was coming and did nothing to stop it. Why?

        That is not a rhetorical question.

        • flashlight joe says:

          “The Fed knew what was coming and did nothing to stop it. Why?

          That is not a rhetorical question.”

          Because that would not benefit the owners of the fed. Their agenda is corruption, embezzlement, and theft. What part of criminal business syndicate don’t you understand?

          We have to let go of the childlike belief that the government and the federal reserve, etc. are working for our benefit, and that, golly gee, they just can’t seem to make it happen.

    • Frederick says:

      Ms Yellen also stated that we would never see another financial crisis in our lifetimes So much for her predictions Just another highly educated tool or is it fool

    • historicus says:

      Janet, what do you think happens when interest rates are too low…pegged way below the ill measured inflation rate?
      The Fed subsidizes debt, and when you subsidize something, you get more of it. Stupid.
      Central bankers need a physics lesson..
      “for every action, there is an equal and opposite reaction”…this applies to economics and finances as well.

  13. Jeff Relf says:

    I couldn’t care less about viruses or the S&P 500.
    Homelessness the greatest healthcare crisis in America.

    • Yerfej says:

      A rich society is going to tend to have some individuals who think the wealth was created out of thin air and that they deserve some of it for doing nothing. That being said there are “some” individuals who have mental health issues and they need our help.

    • GrassRanger says:

      I can assure you that there will not be a housing shortage if this epidemic is allowed to reach its full potential. Wiping out one or two percent of the population will free up a lot of housing.

  14. gorbachev says:

    The economy is 70 % driven by consumers.If money is

    just given to co.s that may or may not hire workers it will all fail.

    Now is the time for a basic income of about 2000 a month per family.

    A sales tax and repeal of the last failed tax cut should fund it.

    • Frederick says:

      2000 a month per family Hey that might even make me think about repatriating Maybe Trouble is soon that amount won’t buy much if the FED has its way, which it will

    • Lisa_Hooker says:

      Think of how much more wonderful our economy could be if we made the basic income $10,000/month/individual. Sales would really take off! Under the government and Fed the amount is completely arbitrary.

  15. pirate says:

    financial crisis 2.0 started on September 17th 2019 when the repo markets locked up as jpm took out almost 60% of its reserves at the nyfed and …instead of lending it out, it bought its own stock..in a massive bull market

    then jaime dimon goes on 60 minutes and call himself a ‘patriot’

    this is about derivatives…they said CLOs were so much safer than CDOs, they said banks were stress tested, even as the government’s own office of financial research called out fed stress test as unrealistic

    and they said this is about the corona virus but the first global death and U.S. death didn’t happen until 4 and 5 months, respectively, AFTER September 17th 2019 when fincrash2.0 started.

    • Tinky says:

      The tremors began way earlier than that. Jeff Snider (of Allhambra Partners) has been all over it for years:

      “Before getting to the rest, we’ve documented the string of evidence pointing in that direction for longer than I care to remember. May 29, 2018, the “strong worldwide demand for safe assets” that first flattened and then ran over the yield curve, inverting and twisting that thing into a grotesque shape the implications of which only a central banker could misinterpret.”

      • GotCollateral says:

        Yup, hes was johnny on the spot on it, and from then reading him over time helped me figure out a thesis to get tail exposure to when this all would blow up… minting it now… so yeah, three cheers for Jeff Snider as well

    • Jackson says:

      Jamie Dimon is a traitor to America and should be punished personally. He has f*cked over millions if not billions of people worldwide. He deserves to be included in the 7th Circle of Hell even though he probably has converted…

      • pirate says:

        100% agree

      • pirate says:

        JPM has 4 felonies in 8 years under Dimon as CEO and Chairman, including the first and only RICO charge in US banking history; the last time the us gov brought racketeering charges was in 2017 against hte gambino crime family.

        John Stumpf the wells fargo ceo got banned for life from the banking industry and fined 17.5 million dollars for his role in the wells fargo fraudulent accounts scandal;

        ..but jaime dimon gets a 31.5 million dollar bonus..

        and to be a fair…a quadruple by pass! haha couldnt happen to a better guy!

        • Frederick says:

          Banned for life and a fine? Should have gotten 20 years hard labor in a prison in Alaska

        • Debt Wazoo says:

          Dude, that is so unfair to Alaskans.

        • historicus says:

          Paying a fine, to be deposited in a special “fund”, instead of jail time, is the great disconnect.
          Malfeasance should be dealt with on an even keel.

      • AlbieOK says:

        +1, +1, +1

      • Shiloh1 says:


      • Bet says:

        I have over the years always mispronounced Jaime Dimon as Jaime

      • Gandalf says:

        Dimon had an acute aortic dissection, not a quadruple bypass. Depending on where and how large the dissection is, it could be treated with a percutaneous catheter inserted stent graft

        It’s the same category of disease that killed John Ritter 17 years ago (several subtypes). The difference- helical CT scanners are now everywhere and everybody with severe chest pain gets a chest CT angio in the ER

        Another reason healthcare in America is so expensive

    • weinerdog43 says:

      pirate, I tend to agree. But if you pop over to Sven’s site (Northman Trader), he puts together a pretty compelling picture that the crisis actually started in October 2018. Normally, I hate charts, but his make sense and he has been right a lot more than most lately.

      • pirate says:

        weinerdog43 thanks and you’re right; tbh i’d forgotten about Q42018 it prolly did start then.

      • Frederick says:

        This problem started in 1971 and came to a head in 2008 but it was papered over with new debt Let’s see if TPTB can pull this one out of a nasty nosedive I’m having serious doubts they even want to at least until maximum damage has been inflicted on the little guys

    • SocalJim says:


      The jpm action you mention was a factor in the repo problem.

      There is a second factor that also contributed to the repo problem. Specifically, at that time, the price moves in the 10 to 30 year part of the Treasury curve was so extreme that banks realized their repo operations were much riskier than they thought since it was possible the Treasury collateral could be worth less than the loan. When they saw the level of risk in repos, they cut back and the fed had to step in.

      • pirate says:

        Socaljim it was a like a minsky moment of dollar illiquidty on a massive scale ..i read rickards say m2 is low and when you look at current m2 charts it doesnt look like its falling so i dont get it;

        but i guess there IS a dollar shortage, with oil crashing there must be a sucking super-massive derivative black hole beyond which no dollars survive why else the massive fed actions, trillion dollar repos, swaps and money market back stops;

        if china wanted to they could flood the world with renminbi right now as their economy comes through;

        1st effects of them doing that in africa and se asia (pakistan, cambodia, singapore, myanmar, north korea,)

      • historicus says:

        If the game was to borrow at REPO rates and buy longer term govt backed paper, how did those doing this get in trouble? It seems the rates dropping in the back end made their purchases improve in price.
        Just asking….

    • Frederick says:

      Ask Max Keiser what he thinks about Jamie Whether you are a fan of Max or not you can’t really disagree with him on this

    • flashlight joe says:

      “and they said this is about the corona virus but the first global death and U.S. death didn’t happen until 4 and 5 months, respectively, AFTER September 17th 2019 when fincrash2.0 started.”

      And MSM propaganda will make sure everyone *KNOWS* that this is the corona virus financial collapse. No, the fed had nothing to do with it. Don’t look over there. The financial collapse was caused by a virus. The fed is trying to fix the virus problem by printing more money. But alas, the virus was too powerful.

    • Lisa_Hooker says:

      The covenant-lite CLOs will not work out so well and will take a long time to litigate and unwind.

  16. Gandalf says:

    So Wolf, after inverting below the short term yield curves, why has the 10 year Treasury popped back up (to 1.12% as of 3/19)? Is this related or not to a global “dollar shortage”?. Is there a global dollar shortage? I can’t imagine there is one, given the vast amount of liquidity the Fed is pouring in. If anything, the excess liquidity is what is driving the 10 year rates up, I think

    What sayest thou?

    • Wolf Richter says:

      Would you buy a 10-year bond that pays 0.35% when inflation is somewhere between 2.5% and up? Well, I didn’t think so. I wouldn’t either.

      The Treasury is going to increase the US debt by about $2 trillion a least over the next 12 months. This is a huge amount. This debt must be sold. The Fed will be buying. But if you want to maintain a real market, the yields have to be where private-sector buyers are willing to buy. I think the Fed is quite happy with the 10-year yield at 1%-1.5%.

      • Pedro says:

        Be careful with the inflation fear mongering. I bought into that thinking myself and now am leaning towards a deflationary spiral as consumers and businesses contract spending in all sorts of categories. Lots of prices will be coming down soon in many categories as demand plummets.

        We have to take another look at our previous belief that inflation was lurking in the shadows. I fell for it myself and now am begging to see the deflation argument materialize in front of me.

        There may be some pressure on certain items but overall I anticipate costs to come down for many months or possibly years until unemployment is back to sub 5%

        The fed just got the green light to print like they’ve never before as liquidation of assets and deleveraging of foreign debts in Usd is accelerating faster than the Fed can reliquidate the market.

        • GrassRanger says:

          Deflation first as a huge amount of wealth is destroyed by the lockdown of the economy.
          Inflation second as the Fed and the Treasury pump out unlimited new money into an economy that is producing at a very low level.

        • Frederick says:

          I was about to answer your deflation scenario but GrassRanger beat me to it

        • Noelck says:

          I always felt you see inflation where the money goes and it trickles down from there. The 2009 financial crisis was a great redistribution of wealth. It went to the financial institutions and they inflated from there.

        • Resjudicata says:

          I think these guys have it correct. The inflation already happened in assets (in “everything” as wolf likes to say). For the short term we now have deflation. When they right the ship, when we get through this, And there is a mighty hole to fill first, inflation will start anew. Then we’ll have another bubble. Rinse wash repeat.

        • historicus says:

          Is everyone forgetting about supply chain interruptions?
          Empty shelves does not make for deflation.
          We all have seen the list of Chinese sourced items we rely upon….
          which of these will drop in price, once/if they get here?
          Oil and gas are the exceptions.

      • Gandalf says:

        That’s why I think the echoes of this panicked Fed response will be worse than this current crisis. Who’s going to buy all that US debt once the pandemic is over? High interest rates, tax increases, etc., are inevitable. Shades of the 70s and 80s

        The countries that best controlled the pandemic without going berserk with spending or quarantines stand to benefit the most. That would be S Korea and Singapore. Too bad their currencies are in such tiny volumes

    • pirate says:

      there is no shortage of ghost commodity dollars

    • Martok says:

      Gandalf and Wolf,

      I read this today and I take it that the FED is anticipating people will be selling their stocks, mutual funds, ETFs, etc and redeeming them into US money market funds, and there could be a shortage.

      IMO – I think they are worried that investors can’t sell their investments for cash and the market seizing up.


  17. Crush the Peasants! says:

    With Boeing as GE, and Ford as GE, and GE as GE. The shitter can not be allowed to go down. Thank Gawd it’s not Democratic socialism.

    • pirate says:

      it’s financial socialism for damn sure

    • 2banana says:

      Did you mean GM?

      And the destruction of 100+ years of contract law to benefit a political ally? With billions of taxpayer bailout money that was never paid back?

  18. Rcohn says:

    After the Covid crisis is over , what will the future bring.
    A massive Federal spending program on top of a current huge budget deficit , which will result in at least a 2.5 trillion$ deficit
    A massive QE program , which balloons the Feds portfolio. Some of this QE will consist of less than stellar paper.
    10 year inflation breakeven rates of ~ around 75 basis points . There has been NO 10 year period after WW2 where inflation averaged nearly that low even when the budget was relatively balanced , let alone a period when the budget deficit was soaring .Owning Treasury bonds at these levels is financial Hari-Kari.
    The dollar has had a massive rally in the last two weeks, primarily because investors were desperate to sell assets and raise cash.This rally will be reversed as investors wake up to the reality of the Weimar response that the government is taking.

    • Unamused says:

      After the Covid crisis is over, what will the future bring.

      Don’t ask questions you don’t want the answers to.

      I deleted my answer to your question. It will not help you to know, and I am loathe to contribute to your malaise. Instead I’ll repeat the advice I offered before the pandemic: enjoy it while you still can, because, strange as it may seem, these are the good old days.

    • VeryAmused says:

      That makes sense because there are so many other currencies the world can depend on. Maybe we will all transfer to digital tulips and hard shiny rocks.


      The country with the most terrifying army and most diversified economic engine wins.

      The world will continue to choke on the US dollar and like it.

  19. Gandalf says:

    MMT and Socialism for the corporate elite

    We are all MMT’ers now

  20. Missouri Jon says:

    The last clause of the first sentence, “by which time all heck at already broken lose in the financial markets…” should replace the word “at” with “had” and the word “lose” with “loose” (I believe.)

    In the third paragraph, second sentence after the first chart, “And the steepness of the new spike shows just how panicked the Fed is about the suddenly collapse of their super-bloated masterwork,…” should truncate the adverb “suddenly” to the adjective “sudden”.

    I love the caustic imagery of your prose, by the way. I can envision your eyes rolling into the back of your head when it became clear that old Jerome had traded his “Soft Landing” plan for “Cannonball Run”.

  21. Bobber says:

    If they don’t dismantle or totally restructure the Fed after this, there is no hope. This is the third bubble the Fed created, and they all popped in “unforeseeable” fashion. Yeah, right.

    Reduce the Fed to temporary provision of liquidity. Eliminate the employment and inflation mandates. The Fed could then cut its staff by 90%, and do a lot less damage to all of us.

    • Wolf Richter says:


      Who is going to “dismantle or totally restructure the Fed?” The lawmakers who sold their stocks when they figured out that the coronavirus would wreak havoc on stocks, while telling the public that this was a nothing burger, two weeks before the crash? I’m not holding my breath.

      • Keepcalmeverythingisfine says:

        You’ve seen the light, or rather the dark is now clear.

      • Dan Romig says:

        Yes, at the risk of repeating, only Congress can dismantle or restructure the Fed. -McFadden Act of 1927

        And if a person cannot hold their breath for 10 seconds, it is likely they are infected with COVID-19

      • Tooldandtired says:

        Wolf has just now said that the emperor has no clothes.

      • polecat says:

        MIGA —

        Make Infrastructure Great Again – build stronger LAMPOSTS !

      • Noelck says:

        It is too bad that 40% of people are hard line Republican and 40% hard line Democrats. To stand a chance we really need a third party in this country. At the very least it would force them to work together against a common enemy :)

    • historicus says:

      If the Fed was merely held to their THREE mandates..
      max employment
      stable prices
      moderate long term rates
      and intervening to assuage short term banking liquidity issues…
      we would all be better off.
      There should be a body that makes certain the Fed doesnt drift from the agreement, the mandates, upon and from which they derive their special powers.

  22. jeffrey borden says:

    The cascade of IG 3 And IG 4 paper to high yield is going to swamp the market. Absolute yields in high yield will go higher. No bid is the new norm for now. Will be interesting to see what PE firms do.

  23. My only concern at this point is what happens to all that stimulus when they turn the economy back on? They spoke of liquidity in the Greenspan era as something which had to be mopped up. That analysis fell from favor, and after 2009 the cumulative effect of adding liquidity was ignored. https://fred.stlouisfed.org/series/BOGMBASE Just as Wolf insists that 1 day REPOs add nothing to the system, the chart suggests something is going on. Now that MB is shrinking, is it really a matter of nominal levels or flow. Fed liquidity worked magic in Sept. while markets were biased positively. Multiples of that amount of stimulus today cannot stop the selling. Water is now gasoline, if the FED is clueless it would be the nature of financial policies and effects which work differently at different times. Does dropping interest rates add to economic growth or fuel more deflation? https://oilprice.com/Energy/Energy-General/The-Very-Real-Prospect-Of-5-Oil.html Seems this is the mother all storms and walking into it.

    • sierra7 says:

      Ambrose P.:
      It’s a bottomless pit.
      Do not stare into it.
      There’s no “trimming of the sails” to weather the storm coming.
      “It’s” gonna rip the sails apart and dash the economic ship on the rocks of economic cowardice, stupidity and greed.
      Stay safe.

    • historicus says:

      The Fed doesn’t remove stimulus. We saw that from 2009 to now….
      pedal to the metal, except for Powell’s brief attempt to normalize rates in 2018.
      What is a concern of mine, as these states shut down, they now put themselves, in their minds, in a place to ask for federal bailouts. They are and have been broke.
      So far, all the states shut down are bankrupt Democrat run states…IL NY CA

  24. timbers says:

    As I’ve been saying for some time, Wall Street doesn’t need an economy. All it needs is more and more QE. The economy and entire universe can dissapear and make no difference….as long as there is more QE.

  25. GotCollateral says:

    One interesting thing i noted recently is that a lot of corporate trash isnt even trading and that investors have to redeem corporate bonds for ETF shares in order to get some kind of liquidity, d/d nav in HYG and LQD are pretty much pegged but all throughout the day, trading in shares of those are below the NAV.

    And then you have BoFA that’s begging for FRBNY to buy corporate bonds… brokest-dealers they are lol

  26. AlbieOK says:

    “Heaven knows we need never be ashamed of our tears, for they are rain upon the blinding dust of earth, overlying our hard hearts. I was better after I had cried, than before–more sorry, more aware of my own ingratitude, more gentle.”
    ― Charles Dickens, Great Expectations

  27. Michael Engel says:

    1) The Wuhan19 is a war against an invisible enemy. Its changing our way of life. Sudden changes create fear, chaos and volatility. But after a while, when people get used to, there will be tranquility.
    2) A tough general, an expert in the art of war, should be in charge. Not doctors or healthcare bureaucrats.
    3) The main battlefields are in Ca, Wa and NYS, the salt water states.
    4) They led the impeachment campaigns, but now they became friends. They need a lot of help from the federal gov.
    5) Those thankless clowns will get it,
    6) The Fed cannot run out of gunpowder in the first charge uphill. That’s how Bunker Hill was lost.
    7) NYC under curfew. Those who violate Homs curfew could get a sniper bullet in the head.

    • Paulo says:


      I think you are way out of line on this forum.

      Where is the moderator?

      • GotCollateral says:

        What did you find particularly offensive? Just seems like ramblings too me.

    • Iamafan says:

      Unbelievable. We live near NYC (beside Westchester) and my son lives in Brooklyn and normally works in Manhattan. Other than some minor inconveniences such as empty shelves at the store, and closed bars and restaurants, staying at home simply causes cabin fever. There is no reason to panic. No traffic. Nuthinburger.

      • Happy1 says:

        42% of all confirmed cases of COVID-19 in the US are in NYC. ICUs in NYC are already near capacity. People who aren’t lying low in NYC who are over 60 are risking their lives, there will not be ICU beds available there in 10 days, possibly sooner.

      • Yeah is it sort of like the blackout, only the lights are on?

  28. TimTimNiceButEverSoDim says:

    In the UK there is an ugly sense growing that what we may have in our hands, a five euro note, a five pound note, a five dollar note, are little more than toilet paper.

    That is, perhaps, dangerous.

  29. Michael Engel says:

    1) US dollar long term trading range is : 80.60 from Feb 1991 to 98.23 from July 1993.
    2) On Mar 2015 USD jumped above resistance to 100.38, showing strength.
    3) USD osc around the resistance line @ 98.23 for 5Y.
    4) This week, USD high was a higher high @ 103.83, an upthrust above the previous high @ 103.81 from Jan 2017.
    5) USD might turn around, until the next round.

    • GotCollateral says:

      You must be looking at DXM0, which is higher than spot.

      You would think with all these swaps lines with ECB/BOJ and the rest of the bastards, it would come down, but nope, swaps is just debt, and will create more future demand to roll over such debt (now FRBNY wants to do it daily now we have compounded daily swap lines lololol)

      This goose is fucked.

  30. KPL says:


    Given that almost everybody and everything has to be bailed out, this time around will the Fed be able to save the world? The only ammo left is the printing press and they are using it heavily. But that does not mean it will work.
    If not, what happens? The prospect is indeed scary.

  31. tommy runner says:

    for better results and a quick tear off, leave the very bottom snap (cuff) unsnapped.

  32. Escher says:

    Wonder if this is the perfect time for the global elite to hit the “big reset” on the financial system, which is coming down the pike according to some of the doom and gloom sites on the interwebs.

    • Old-school says:

      This idea of a reset is one embraced by some central bankers when they are at the end of monetary policy. It basically calls for a once and done extremely painful politically unacceptable action with the promise to never do it again to instill necessary confidence to rebuild economic activity. FDR’s gold grab might be an example.

      • Or the Plaza Accord. Competitive currency devaluations in a forex system never end. If the US were to defend the dollar at a point of equilibrium that might act to end the process, at least temporarily. Once you are in the middle of a crisis, there is no danger of causing a crisis. We may be only days from a market freeze anyway. The only problem is the vacuum in leadership. Globally a coordinated move would shut down the populist fringe, in France and Germany, and Italy, but overturn the leadership in UK and US, though I think Johnson is adroit enough to survive. Have heard rumors that Fed/Treasury is suppressing the price of gold, and talk about banning short sales, which is really self destructive in a market crash. Short sales preserve losses, there is someone else on the other end. Otherwise money gets vaporized.

        • Blake Kelly says:

          I don’t think short sales preserve money, they make 2 losers and take the loss of one as a transfer payment. And depress the stock price, which sends a signal, and they can lose money, which is also just a transfer and is their counterparties gain. So more useful than harmful, but it can’t catch a falling knife. Some losses cannot be neutralized.

  33. ALWAYS TANKIE says:

    Initial ILO estimates point to: buy guillotine or, thanks to advances in tech, wood chipper stocks.

  34. Sir.PiratePapirus says:

    To all the “We are bailing out the world” crowd. No you are not, but you sure are doing a good job at destroying it every opportunity you get aside from endless wars on Afghan chestnut farmers and wedding attendees that is. Those primary dealers ie the “foreign” ones beside their local operations also provide USD funding to their countries, they are required to buy US treasuries, and then sell them to other banks including the Fed. The problem has been two folds since the crisis in 2008. Collateral and the abuse of USD reserve system by the US. The 2008 crises led to the realization that collateral can not be treated under the same rules and roof anymore. So collateral was divided in two groups liquid collateral ie HQLA/C (high quality liquid asset/collateral) and crap collateral ie everything else. The banks realized the danger of holding illiquid collateral even overnight in 2008, which translates to losses in times of stress and crisis. Second is that after 2008 the US weaponized the USD, and abused it’s reserve currency status, undermined international institutions and settlement agreements which has now culminated with Trump and his tariffs and blocking access to USD willy nilly. With these two in mind we can explain what is going on from the “foreign banks stealing hard working American wealth” (and boy oh boy is that a loaded sentence, but be that as it may), to repo markets in the US. These primary dealers buy US treasuries as required, since treasuries are the most liquid asset class and US treasuries are the highest quality out there they are also the best collateral ie HQLA/C, so these banks secure this sort of collateral for their big clients first which are big sovereign institutions/governments in need of USD, they need them because they have to secure their international trade which is conducted in USD, to service their debts and obligations in USD from corporations that issue dollar denominated debt to financial institutions, this has led to a huge spike in demand for these assets including hoarding them for later use, meaning HQLA collateral is being traded as a commodity, which has led to a shortage of collateral elsewhere, hedge funds etc. So when they show up in the repo market with crap collateral rates spike. This is the reason that the 1.5T offered by the Fed at the most illiquid time in history when demand is as high as it will ever get, is not taken, because the Fed also doesn’t accept crap collateral. The second part is the weaponized USD reserve status and American hegemonic policies around the world. But that is for another time. Every solution that the Fed has offered so far bypasses the real problem. They offer to buy commercial paper but only quality ones, they offer 1.5T repos but only with HQLA collateral, they reopen all the alphabet soup facilities from 2008 for money markets and credit markets but again accept only quality collateral or are targeted at quality businesses and institutions. They do currency swap lines with other central banks in Europe and Japan but the biggest demand comes from emerging markets. With few exceptions here and there almost all of the Fed intervention makes exactly 0 difference and fix nothing, despite the grandiose announcement of trillions and gazillions . All this says two things. One big businesses that are fine will continue to be fine thanks to Fed ensuring liquidity. Problematic businesses ie junk your teslas and netflix and the rest of your millennial gen z x y and q put together, crappy businesses that sell rainbows and unicorn piss will continue to be problematic. And two it says that the Fed despite it being many things to many people is a bank in the end, and as any bank they also want to make money. They will not accept crappy assets until it becomes inevitable and they are forced to take them to ensure stability at all costs. The final solution will come in the form of the Fed buying corporate debt, and not just the quality ones but the junk too, and setting up a direct lending facility to corporations or a bad bank of some sort to take in all the trillions of junk from the market and take in CLOs from the banks hands, when the Fed does this the bottom is in. It will happen when Nasdaq is 3500 and S%P 1500. C u there and then. Sir.Pirate out and Viva El Salvador.

  35. The Fed is orchestrating an end to the global financial system. Other central banks are doing their part, but US monetary policy is past irrelevant and now proactively destructive of wealth and economic stability. The Fed (Smith’s invisible hand) and the virus are both phantasmagorias, which have reversed themselves. Acting in the public interest, we as individuals are destroying the essence of the previous financial system, without a tangible catalyst. These are amazing times, take it all in, life will never be the same.

    • historicus says:

      Central banking since 2008 has become backdoor Socialism and Globalism.
      Central Banking is back door Socialism. The unelected making economic plans behind closed doors, short circuiting basic supply demand price discovery of a free market by creating fake demand for government debt, and themselves being immune to the negative consequences of their policies (inflation protected pensions for them, courtesy of us)
      Central Banking in Europe attempts to save failed Socialist countries that overpromised pensions and other compensations. Slashing rates to negative, dictating what government will pay to borrow OR be paid to borrow.
      Central Banking is a global network, and thus it is also a back door to globalization.

    • historicus says:

      Ambrose…right you are.
      And few see it.
      Central Bankers are the new Royalty.
      Dictating policy
      Immune to the ill effects of that which they dictate to others (inflation protected pensions)
      (AGB 9th Indiana)

  36. The Profit says:

    The circus is closing it went bankrupt. The last clowns are in attendance. Tomorrow the human race will re-invent a solution to the problem that will be mine boggling let the geniuses out of the bottle.

  37. RedRaider says:

    What % of people can no longer afford to live in big city (SF , LA, et al) but still work in the city and, as a result, have long commutes? Is the gas tax just the big cities way of continuing to tax these people?

    I notice Coronavirus and market crash occurred together. Which means they are both part of the total effect. But what’s the cause of that effect?

    I’m not saying Covid-19 isn’t real. 200 deaths seems to have brought us close to martial law. Whereas with Swine flu the US alone had 80k deaths and it didn’t cause a ripple in the zeitgeist. Something’s out of kilter here.

    Is it possible large cities throughout the world are failed experiments and currently having their SHTF moment?

  38. 91B20 1stCav (AUS) says:

    Wolf-a (dumb?)question from someone who’s always been a working (except when it wasn’t available) non-market-playing muppet. I think you’ve addressed this in the myriad terms of ‘everything bubble’ inflations-but when I read and re-read the term ‘wealth destruction’ from commenters I wonder if we really have a generally agreed-to term as to what constitutes ‘wealth’ as opposed to (as my ’60’s era high school social studies teachers termed it ref the Crash of ’29) ‘paper profits’? I suspect it’s a philosophical difference in how ‘wealth’ is viewed between proles and speculators/coupon-clippers (old-school term ref stocks&bonds, not the product discount vouchers in one’s daily feeds), and as always, entertainingly presented by the commenters on this site. I understand I’m making a not-so-simple semantic query, here, and, given human nature, perhaps it defies a generally-agreeable answer.

    As always, Wolf, thank you again for tirelessly reporting on the numbers on the seeming convoy of financial trucks that appear to frequently take aim at the average citizen. Stay well (I know you will stay rational).

    May we all find a better day.

  39. Dink Singer says:

    The big problem with the word “bailout” is that people think it means giveaway. In the last crisis the Fed gave absolutely nothing away. All of its lending was fully secured, it did not have a single default on any of the loans it made and as the GAO noted in its 2011 audit of the Fed’s Emergency Assistance:
    “In setting program terms and conditions, the Federal Reserve Board sought to make loans available on terms that would be effective in addressing market strains during crisis conditions but onerous compared to terms available during normal market conditions.”

    In the initial AIG bailout (which would be illegal today because the Dodd-Frank Act requires all Fed emergency programs must be “broad-based”) AIG paid an upfront 2% commitment fee on the $85 billion line of credit, the interest rate was set at 90 day LIBOR plus 8.5% or 12% whichever was higher and there was a quarterly continuing commitment fee at an annual rate of 8.5% on the portion of the line that had not been drawn down. On top of that AIG had to issue preferred shares for 79.9% of its total equity to be held in trust for the U.S. Treasury. While the Treasury TARP took over the AIG bailout and lost $15.18 billion there, it converted the shares to common and sold them for $17.55 billion. I don’t know how much the Fed earned for the American people from the AIG line of credit, but the Maiden Lane II and III SPVs that were also part of the AIG bailout generated profits of $2.8 billion and $6.6 billion.

    This time, partially because we are in a much lower interest rate environment, the interest rates the Fed is setting are much lower, although there have been lots of complaints about the commercial paper rate being too high.

    While it is off-topic, the TARP bank support programs generated an estimated lifetime profit of $24.5 billion with about $40 million in investments still outstanding and the TARP credit support programs generated another $3.34 billion in profit. The TARP auto industry programs lost about $12.07 billion due to the GM and Chrysler bankruptcies. Only the TARP housing programs gave money away, $30.45 billion so far and a lifetime estimated total of $32.23 billion, but that money went to reduce mortgage payments on millions of American homes.

    • Wolf Richter says:

      Dink Singer,

      I understand that you’re my Fed troll, paid for by the Fed’s outreach and agitprop department or whatever. So that’s your job, I get that.

      But this is blatant Fed propaganda and BS. When a company fails because it cannot pay its bills because it wasted BILLIONS OF DOLLARS on share buybacks, and now it doesn’t have those resources, and instead has way too much of debt, or it took some huge bets that blew up, well, the solution is a chapter 11 bankruptcy filing. Shareholders and creditors need to pay that price. Period.

      It would also help to indict some of the responsible people — including such characters former GE CEO Inmelt who, while on the Board of the New York Fed, worked on the bailout of GE and his own wealth stuck in GE shares. Where were the jail terms for the corruption perpetrated by Fed members? See the GAO of the Fed.

      It would also help indict some of the responsible people — including such characters former GE CEO Inmelt who, while on the Board of the New York Fed, worked on the bailout of GE and his own wealth. Where were the jail terms for the corruption perpetrated by Fed members? See the GAO of the Fed.

      • historicus says:

        Go gett’em Wolf!
        Not to mention the G Sax partner who was on the NY Fed board and had a conflict created when the company became a commercial bank, by the graces of Paulson. The partner made some quick investments before departing. Prosecution? We must look forward, never let this happen again, etc etc….

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