iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
20,329 Blog Posts

IMPORTANT ALERT: The Treasury Has Coopted the Fed

News broke late this afternoon that the Fed would buy small business loans from banks. In other words, the treasury isn’t taking on debt for these bailouts, but instead making the Fed Brrrrrr with their printing presses and do the work for them. Also, late in the day, the mortgage services were pressing lawmakers to have the Fed fund them in order to service bond holders. See, people aren’t paying their mortgages, so instead of depending on the actual tenants to pay them — they want the Fed to give them the money. AND THEY WILL GET IT!

Why is this important? Because the treasury isn’t borrowing money to fund these facilities and instead using Fed funny money to do it — super inflationary. If this trend continues, the Fed will be the new defacto treasury, financing all of the governments projects with UNLIMITED printing press dollars. There has never been a more bullish case for gold.

The Dow lifted 1,640, Nasdaq more than 500. I closed out all of my shorts and went long with 95% of my account — caught upside in most of my intraday longs and will likely be selling them all very soon.

Stop complaining about how rigged everything is and blaming others for your fuckups. It is what it is — play the game and try to limit the losses while maximizing the gains. No one said this was an easy racket.

Surprisingly, this had zero effect on markets today.

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78 comments

  1. bambam

    So what’s the real risk to the banks and mortgage companies if you know you have this massive guaranteed safety net now?

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  2. it is showtime

    Trump has around 60% virus approval.
    Dems point to incompetence, denial, lying, idiocy
    Trump base 95%+ with the 60% general.
    Trump would become one of the greatest presidents ever if this is resolved.

    Trump,
    will not be allowed
    to not get the ultimate crash leg,
    “becoming” one of the greatest presidents ever

    Where….
    he would be unfettered…..
    in pursuing criminal charges on the establishment
    circles who without respite have been running
    disruption and shakedown operations through the
    ….entire….
    ….1st term

    Hi elites. see my finger. Am I close? See My Finger

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    • purdy

      Woah, you have become and optimist re Trumps potential. Trump is just another, more entertaining, flavor of establishment monkey. Yeah, someone in his position could be more …but he doesn’t have the vision …or the credibility. This is a moment where someone could comfort the paranoid who run the western press and unite humans to confront threats …be they viral, nuclear, asteroidal ….uniting all of us. Hope someone steps up.

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  3. i_am_nemo

    They are talking about spending $10 trillion dollars that doesn’t exist. Meh, that’s only $80 thousand per household. Assuming 0% interest, $10 in payments a day for the next 20 years is very doable for most families.

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    • richardweiner

      I hope they know what they are doing. I am worried that between Powell, Trump, Pelosi and McConnell there is not a Jew among them. Jews know money and are smart. Luckily Mnuchin is around though.

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      • snoozemr

        it’s fascinating to me how somehow nazis always seem to gravitate to to this site. no idea why though.

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        • richardweiner

          Nazis don’t like Jews. I believe Jews are the supreme race. Ergo, not a Nazi.

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  4. peaches

    i actually let these grumpy old men scare me into selling my entire UGLD position at $185.

    fed = treasury.

    took 107 years but later is better than never.

    mission accomplished.

    is there an antisemitism triple leveraged ETF?

    people are gonna get in trouble for paying attention in economics class and not trusting the stupid government… again…

    thank God for the 2nd amendment.

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  5. helicopter ben

    Why even have taxes if the government and fed have no issue making unlimited money for Congress to spend?

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    • edge

      MMT. Google it. They have a plan.

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      • edge

        Not a good plan though…but damn, the plan we have now sucks too.

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        • helicopter ben

          Yeah, but with MMT why are they taking 20%+ of my money every paycheck?

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  6. i_am_nemo

    Buy the stupid ass fucking banks. They will own everything soon.

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  7. crabby

    June. That smoky, silky voice, like a female Nat. Helen up next?

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  8. edge

    The Treasury needs a little room Fly. Mnuchin will have his hands full buying SPY ETFs.

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  9. edge

    There can’t be any doubt. Either we’re Japan or we crash.
    Capitalism my ass. OLIGARCHY OR KLEPTOCRACY?
    It’s just a matter of degree…and the right wing is scared of socialism?
    We warned you.

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  10. edge

    In case anyone is interested, the Fed has always done this kind of thing, it’s the way they conduct monetary policy. I’ll keep it simple.
    Prior to this year, when the Fed bought securities it planned to sell them later. In 2008 people became skeptical that that would be possible, but gave the Fed the benefit of the doubt.
    That’s all been stood on its head. There is no doubt about that as of today, and it’s called monetization. That’s when the Fed permanently injects money Into the economy. It is a brand new thing and is generally considered a bad thing. It means that the financial markets are out of control.
    Before 2008 the fed injected when it bought but when it sold the cash was removed from the economy, so it really wasn’t money printing. But they’re printing now.

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  11. Mr. Cain Thaler
    Mr. Cain Thaler

    I’m very confused. The Fed did this because banks like Wells Fargo said they wouldn’t participate at all due to regs. This doesn’t expand the size of the program, it just makes it work as intended.

    That said, the path is up from here I guess.

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    • peaches

      Sounds like banks/markets are calling the shots?

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    • Dr. Fly

      Mortgage services are actively protesting the fact that people aren’t paying their mortgages and they’re caught holding the bag with bond holders. This is not hyperbole.

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      • edge

        True, but once again, the financial industry gets made whole with a bailout.
        The homeowner gets to go bankrupt.
        Then the financiers, because they have their money, can afford to buy all of the things that regular people can’t afford to keep.
        It’s quite a machine.

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      • Mr. Cain Thaler
        Mr. Cain Thaler

        I don’t blame them, especially with places like Oregon making it illegal to collect rents for a few months. There are major risks for the banks here.

        But again this program is well defined at ~$300B. It’s not like they’re just printing a few trillion here.

        The forgivable nature of the debt is a tad concerning here, as definitely cracking that door open more…

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  12. heckler

    Could they just have froze rent and mortgage for three months instead of this BS? They better not take people’s houses again.

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    • Mr. Cain Thaler
      Mr. Cain Thaler

      The people you pay your bills to also have bills to pay.

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      • edge

        You miss the point Cain.

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      • peaches

        right but my landlord cant go get a forgivable loan at BAC if I suddenly call him and tell him i ran out of cash. Dude won’t even go outside right now.

        to pretend these are free markets is a sin plain and simple.

        people work all their lives and get their net worth wiped out, houses foreclosed, and they go to work anyways because they are told that this is the greatest system on earth

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        • bambam

          Why not just freeze mortgage payments now and take it onto the end? It would keep the owner in the home. Give them a break to find work, save, pay bills, etc. And then after the deferral period, it goes back to normal. The few months they deferred just get tacked onto the end with reasonable interest (no not 20%+).

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    • edge

      That’s not the pattern.
      You would think that after being bailed from their ridiculous financial decisions multiple times the financial industry would give something back. Nope.
      They are officially a cancer.

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      • heckler

        They have zero problem putting boot to throat

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        • tjnyt

          Survival of the fittest…

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          • edge

            That’s insane doc, or whatever you are. But I suppose that some like oligarchy.

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          • peaches

            survival of the fittest would let the banks fail and stocks crash. the billionaire dividend and interest class would have to learn skills and get jobs. those people with skills they can exchange for money could buy up seriously cheap stocks.

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          • peaches

            a landlord collecting $350,000 in rent pays less taxes than a brain surgeon making $350,000 since the new 2018 tax bill.

            this type of economic policy incentivizes people to speculate.

            The best paid people in our economy get paid to buy corporate debt ETFs with 40x leverage.

            its hardly survival of the fittest.

            more like feudalism.

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  13. i_am_nemo

    They have to print. Banks will be pressured to defer credit card payments and increase credit card available credit simultaneously. More debt & cash advances at 18% + interest.

    Half of this country will be permanently indebted to the banks.

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  14. i_am_nemo

    Lawmakers will probably make some radical adjustments to bankruptcy laws soon so the indebted have no method of discharging onerous debt.

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  15. edge

    Off topic but- why would any rational person pay 2700 for the S&P? Yet we came so close.
    2750 is in play I guess…and 3000 would be nuts. Clearly, the country has lost it.

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  16. purdy

    US needs to borrow now …hopefully from others … and inflate the debt away. PMs got hammered in our last recession ….maybe not in this reset. Burp.

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    • i_am_nemo

      Treasury should physically assay banks gold holdings and Fed holdings aka Ft Knox.

      A return to the gold standard is not out of the question if they print to infinity.

      For the time being the dollar is the world’s reserve currency. A lot of countries currencies would have to fail before us. Japan comes to mind.

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    • heckler

      If they print to infinity and also take people’s houses and also only the rich get richer we are gonna have a MOTHERFUCKING GENERAL STRIKE on ours hands, and I might support it.

      If they can printing forever they can pay UBI and Medicare for all

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  17. richardweiner

    My friend Chaim Yitzak Silverstein says we might finally have inflation coming out if this. He says own some gold.

    Given that he is a Jew, you should listen. Jews know money. And let’s face it, they are smarter than you and me. Jews are the master race.

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    • tjnyt

      Jewish people also have the longest and broadest perspective, thats why a steady, measured and confident hand at the FED.

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    • peaches

      Where is my triple leveraged antisemitism ETF!?!?

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    • peaches

      Your Kings rob you blind and you blame the Jews because to admit your culture is shit is simply too hard to swallow. Anyone who didn’t think of buying gold since America elected a president with down syndrome is stupid.

      Anyways. Jews spent 1800 years or so not being allowed to do anything but trade metal and getting burnt alive or raped whenever they tried until Napoleon came along smoking blunts and jacking off in the Royal palaces of Europe like a boss.

      You get public schools and cell phones and the Jews get to make the sickest financial trades ever because they know USA and King Richard III are the same bullshit.

      world keeps spinning.

      Karma is a bitch no?

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  18. tjnyt

    Again a silly discussion of Money without really understanding what it is – a medium of exchange, far removed from “the storehouse of value”. It is like electricity generated by FED and distributed by banks and regulated by congress.
    Money in its early, the precious metal days, there always were shortages of metals & poverty/scarcity.
    Later, in paper money days, paper clogged distribution channels, mattresses, safes, etc and failed to perform its purpose as folks who got more than they needed, hoarded.
    In the modern era, at least in adv industrial nations, electronic money is the most efficient medium. Easy to create, easy to send down the channels and monitor its effects.
    Hey if you can’t pay it that’s fine. No your children will not be indebted. Authorities know you can’t take it with you. As the most efficient medium of exchange so far, they know how to soak up the excess, with stocks, bonds, ipos etc.

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    • tjnyt

      Talk about electronic money lost 10k in an LK flash. GS in Singapore is on the hook for hundreds of millions as a result of loans against this Chinese crap.

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    • heckler

      So are you just straight up in the tank for MMT?

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      • tjnyt

        I have entertained the idea since DEC was a great company. I recall discussing during a flight, with a fellow passenger, how a Japanese company had automated production with only a handful of employees. But computer ay the top was form DEC. and I wondered the future….

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      • Mr. Cain Thaler

        MMT will have its day in the sun and almost immediately socialists will be like “MMT says we can just spend whatever and it will always work out” and then everyone will very quickly remember why we didn’t have MMT before now.

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    • i_am_nemo

      Give it a month. There is going to be social unrest and the government is completely unprepared for that compared to this shutdown.

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      • tjnyt

        Who will lead rt/lt?

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      • heckler

        I’m already dressing like a cowboy bandit when I got out dog

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      • edge

        Ha. A funny thought popped into my head. Hillbillies running out of their trailers and shooting the mailman…scratching their heads about what to do next…and just go back inside.

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        • i_am_nemo

          Hillbillies live outside the metro areas. They have an old car in the yard and a motor hanging off a big tree branch. That is where a gun lives.

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          • edge

            Yeah, I’m very familiar with them. My wife and I come from hillbilly stock. They live in cities too, most are armed, and some want to use them. We are a mixed family and although I don’t want to shoot at anyone It’s possible I will have to. There will be no discrimination since I’m so open minded.
            Hopefully we will chose the Japan route and not the collapsed hellscape route.

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          • i_am_nemo

            People on the economic edge can’t afford to prepare. People that can afford to prepare haven’t.

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  19. Orson

    A cluster in the making for the last 12 years.

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    • edge

      The stimulus in the Great Recession was too weak to achieve breakaway. Politics. So the economy limped along.
      By 2017 we had a chance to raise taxes to reduce the deficit and raise rates. Trump wanted the Bigly-est Bubble.
      Powell came along and kissed Trump’s ass like the rest.
      A trap had been built and the door closed around December 2018.
      The economy was unraveling by January. Covid and lockdowns are irrelevant.

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  20. discoordinated

    So… merge treasury and fed? This idea has been circulating for about 3 weeks pretty publicly.

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    • edge

      It started with the fed funding of SPVs. The fed is limited in what it can buy but not the treasury. Purely semantics now that a way around those pesky rules has been found.

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  21. metalleg

    Fly, thoughts on auto insurers? With fewer people driving their cars, accident claims have to be way down. There’s been no downward adjustment to the premiums we pay so insurer margins should be growing immensely.

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    • dawg

      Allstate….

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    • tjnyt

      Insures invest in REITs, stocks, bonds …

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    • moosh

      Also infrastructure plays. This is literally the best time ever to do improvements, almost makes you wonder…

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    • crabby

      What makes you think he reads this, let alone replies? He is the Fly; we are the gnats, swarming in an empty room.

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      • metalleg

        As the almighty, he is all seeing and all knowing. Having read every book, magazine, and newspaper ever published, he’s certainly read my comment.

        He’s busy now writing his next post so while we are discussing ancient history, he has moved on to the future.

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  22. numbersgame

    Ouch. This is the problem with with having too much knowledge. Well, of course, deferrements aren’t goign to solve things.

    And of course, the small business loan program won’t work well.

    I didn’t anticiapte further FED action o nthis front, though. Still, I’m not aure how it works in real life. Huge questiob mark, because while COngress has no qulams aboud spending taxpayer money into a black hole, the FED is different. They don’t do it without a bagholder.

    Small business loans are cosiderably more risky, so there is no way that the FED takes on that risk. I was hoping for more details, but the market doesn’t seem to care. However, the FED is *not* actaully buying small business loans. Even the little bit releassed so far, say that they “will establish a facility to provide term financing backed by PPP loans.” So bascially, this is similar to when the bank makes you a car loan. They lend you the money with the **car as collateral**, but importantly – if you stop paying, they re-possess the car but **you still owe the balance of the loans***. If the FED bought the loans, they woudl have to try to colelct from bankrupt small business. But in this case the SBA laons are just collaeterl for the loan that the FED makes to the banks.

    When the FED conducted their alphabet soup back in 2008-09, they made banks take haircuts on the value of the colateral (becuase the FED doesn’t want to lose money), so it will liekly be the same thing here. So while it is unclear who will the bagholder if these laons default, you can bet that it won’t be the FED. Of corse, this leaves two options: the bansk and the taxpayers.

    I’m pretty sure that the FED can’t use the money Congress allocated to Samll Business as their backstop. However, they likely can use Mnuchin’s piggy bank fund. But of course, that doesn’t increase the $400B tha Congress initially apporpriated, so if the FED uses this to backstop SBA laons, that will be less available for larger corporations.

    Hopefully the FED clarifies this sooner reather than later

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    • numbersgame

      VIX futures are almost exactly where they were at 2pm yesterday when the FED made yet another surprise policy change (41 and change)

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  23. tjnyt

    Was up 25% yesterday today it is energy, airlines BA, H, HLT, HOG, may do even better today.

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    • tjnyt

      Make it 30% and sold, unlike the last rally when I gave up 2/3 of gains last wk, including LK.

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