Fed: JP Morgan Poses a 'Serious Adverse Effect To US Financial Stability' While Media Ignores

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

Upton Sinclair


"Hell is empty and all the devils are here."

William Shakespeare, The Tempest

And these days it is not always so obviously a question of salary. But it is often a question of access to the powerful, and the great favors, money, and privileges that they may grant as a reward.

There has been no meaningful and sufficient financial reform in the US, thanks in large part to the money power of the Banks and their faithful courtiers in the professional and political classes.

How can we not expect political failures in financial reform when almost fifty percent of Super Pac money comes from just 50 sources?

Do you reasonably expect any movement on changing this corrupt system from the establishment Republicans or the Wall Street Democrats?  They and their friends are doing very well financially as the data shows.

One of the reasons why the Fed is raising this alarm now is in part to the serious grilling that Senator Elizabeth Warren gave to Janet Yellen in a hearing last year, to which Janet had no good answers.

As JPM showed in their most recent financials, they are prospering once again while risking the rest of the US economy by their pursuit of greed and socialization of their losses.

And as we learned yesterday, Deutsche Bank admitted that they had been manipulating the prices of gold and silver in the world markets, and that they were certainly not alone in this fraudulent behaviour.  As I have asked so many times, if the Banks have been shown to have manipulated so many other markets of consequence, how can anyone be so skeptical when the evidence showed that they were doing the same thing in the gold and silver markets.

A rank amateur might not see it on the tape and the data, but any seasoned pro could not miss it unless they were wilfully blind.  Keep this sort of thing in mind as you take your pick of analysis and associated spinning of the facts.  I have seen a lot of nastiness on the Street over the past thirty five years, but this is one of the most rotten financial market climates that I can remember.  What used to be the exceptional misbehaviour seems to have become the accepted standard of doing business.  This is one of the most brutally cynical political and financial climates that I can remember and my memory of this goes all the way back to the early 1960's, to LBJ and Nixon.

The mainstream media continues to yawn, and when the next financial crisis comes, one well may ask 'why didn't anyone see it coming?'

The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns
By Pam Martens and Russ Martens
April 14, 2016

Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system...

At the top of page 11, the Federal regulators reveal that they have “identified a deficiency” in JPMorgan’s wind-down plan which if not properly addressed could “pose serious adverse effects to the financial stability of the United States.”   Why didn’t JPMorgan’s Board of Directors or its legions of lawyers catch this?

It’s important to parse the phrasing of that sentence. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”

That statement should strike fear into even the likes of presidential candidate Hillary Clinton who has been tilting at the shadows in shadow banks while buying into the Paul Krugman nonsense that “Dodd-Frank Financial Reform Is Working” when it comes to the behemoth banks on Wall Street...

JPMorgan’s sprawling derivatives portfolio that encompasses $51 trillion notional amount as of December 31, 2015 is also causing angst at the Fed and FDIC. The regulators wanted more granular detail on what would happen if JPMorgan’s counterparties refused to continue doing business with it if rating agencies cut its credit ratings. The regulators asked for a “narrative describing at least one pathway” for winding down the derivatives portfolio, taking into account a number of factors, including “the costs and challenges of obtaining timely consents from counterparties and potential acquirers (step-in banks).”

Read the entire article here.

Deutsche Bank Concedes a Settlement For Widespread Rigging of the Price of Silver (And Gold)

It appears that with the regulators either asleep or blithely ignoring blatant price manipulation in the precious metals, it remains for private parties to bring suit for the damages by these banksters in the 'free markets.'

As I recall, the CFTC conducted a three year study of the silver market, and finally came out with a simple comment that 'there is no evidence of manipulation.'

The Banks named in this private lawsuit in US Federal Court were Deutsche Bank, Bank of Nova Scotia,  HSBC, and UBS AG.

Postscript:  Apparently Deutsche Bank is also admitting to gold price manipulation, and is willing to name names of accomplices as noted here.

Reuters
Wed Apr 13, 2016 7:09pm EDT
Deutsche Bank to settle U.S. silver price-fixing litigation

Deutsche Bank AG has agreed to settle U.S. litigation over allegations it illegally conspired with Bank of Nova Scotia and HSBC Holdings Plc to fix silver prices at the expense of investors, a court filing on Wednesday showed.

Terms were not disclosed, but the accord will include a monetary payment by the German bank, a letter filed in Manhattan federal court by lawyers for the investors said.

Deutsche Bank has signed a binding settlement term sheet, and is negotiating a formal settlement agreement to be submitted for approval by U.S. District Judge Valerie Caproni, who oversees the litigation.

A Deutsche Bank spokeswoman declined to comment. Lawyers for the investors did not immediately respond to requests for comment.

Investors accused Deutsche Bank, HSBC and ScotiaBank of abusing their power as three of the world's largest silver bullion banks to dictate the price of silver through a secret, once-a-day meeting known as the Silver Fix.

According to the lawsuit, the defendants distorted prices on the roughly $30 billion of silver and silver financial instruments traded annually, violating U.S. antitrust law.

UBS AG was also named as a defendant. Investors accused the Swiss bank of conspiring to exploit the Silver Fix, though it did not help set the benchmark....

Read the entire article here.

Stock and Metals Chart Updates - God Bless the Child

Here are the stock and precious metals charts updated as of about 3:15 EDT.

There was some information about the precious metals trusts and funds earlier today.

I am a little bit distracted and keep misplacing my wallet and my book of parking coupons for hospital etc.  My son gets a kick out of that.  So please forgive any typos as I am on the run as they say.  Things are improving and I am making plans for the rehab center hopefully in a few days.

The economic news this morning, both PPI and Retail Sales was lousy.

Supposedly it was risk on, and stocks were in rally mode, because of the results that JPM showed this morning, raising expectations for the financial sector.

The sector inhabited by the public, not so much.

Off to the hospital. I have an in-patient rehab center picked out and arranged when the most precious jewel is able to be transferred. She will be coming out of the ICU tomorrow. This last go round has taught me to take it one day at a time.

In case you were wondering the rescue dog Dolly has blended in quite well, and is now a member of the family. She is well over her insecurity and is in the process of training us to do her bidding.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds

It looks like we have had some notable changes in the closed end trusts and funds since February.  I include both the current and the previous charts of these instruments below.

The first thing that I looked at is the drawdown in gold bullion at the Sprott Physical Gold Trust that has occurred since February of about 57,702 troy ounces.  I think it is probably due to redemptions rather than fund sales because the cash level of the Trust is a workable but relatively modest $1,870,00, down from about $3,345,000.  As you may recall Sprott completed the acquisition of the Central Gold Trust (GTU) in January of this year.

As I have noted several times before, most of the funds and trusts that allow for bullion redemptions have been seeing outflows of gold bullion for some time now, as gold has been moving from West to East.  We have seen some 'inflows' into the big ETF for gold of GLD and a few others like that this year as gold rallied off a bottom.  But I do not quite view the gold in GLD on the same level as some of these closed end funds because of its relative volatility and the nature of its sub-custodial relationships.

Perhaps it is just some perspective bias on my part.  I trust few completely, but then some less than others.  And GLD falls into that category of unease because of their structure of custodianship.  I believe there may be undisclosed counterparty risk, which is not as much of a consideration for short term trading, but of more concern, like the CME was for Kyle Bass as a fiduciary for example, in the kinds of scenarios when gold is held as a long term asset held for 'insurance' against financial dislocations.

The Central Fund of Canada has still not addressed its cash situation, with the current cash assets shown as a negative $1,539,263 (1,539,264), down from a modest positive cash position of $173,805 in February.  I have to admit I was a little surprised to see that.  The bullion levels remain the same.  Typically the Fund does a shelf offering of additional shares to raise cash and add to bullion levels.  Or it is acquired as was its sister the Central Gold Trust.

And Sprott Silver has gained quite some silver bullion from its recent follow on offering and raised a substantial amount of cash.  I estimate their cash assets position at around $15,167,600, which is a notable increase over their cash of $1,779,270 which it had in February.  And the silver bullion in the fund has increased from 48,788,515 to 52,483,526 troy ounces.  The number of shares outstanding has also increased from 127,331,218 to 139,631,218 or roughly by 12,300,000.

Here is the press release on Sprott Silver's follow on unit offering which has just completed.

Interestingly enough the Sprott Silver Trust is showing a slightly negative premium to its NAV, as compared to a +2% premium in February.  I suspect this reflects some discouragement with regard to silver than to the trust itself.

The gold/silver ratio has fallen from 80+ to 76 which is still rather high historically.  I do think that there are some reasons for this, regarding the state of the 'free float' of gold bullion in London, with some side effects appearing elsewhere in NY and in some of the funds as mentioned.  Silver is tight but apparently not as much as gold.  Still, the central banks own little silver, and so supplying bullion for 'attitudinal and expectation adjustments' for the management of perception is not as readily available.  Excepting of course the large silver bullion stash that is being held by JPM, which seems to sometimes do heavy lifting for the Fed in the markets.

I get the sense that the Fed is caught in a credibility trap, and that they are managing a scenario of financial bubbles and busts that is highly counterproductive and the result of their group thinking and heavy bias to the wealthiest few and their banking system.   After all, the Fed is their creature whether we like to admit it or not, and the linkages and much used revolving door between Wall Street and the halls of power in this country is well established.  And as always, the enablers will speak nothing to power but what they wish to hear, and what they wish their courtiers to say to the rest of us, with a few notable exceptions.

I doubt very much that there will be a sustainable recovery in this country without serious and significant financial and political funding reforms.  And the established status quo, including the so called liberals who are captured by the system of privileged treatment and positioning itself, is dead set against it.

Thank you for all your kind words and messages.  I am hopeful that our Mary will transfer from hospital to an in-patient care rehabilitation facility for the weakness on her right side and for the 'fluent aphasia' in her speech.   Time will also be a great healer as the brain swelling subsides even more, but some targeted therapy looks to be necessary.  We all miss her and she misses us.  A home without a wife and mother is just a house, because she is its heart.

Here is the previous spreadsheet from February of this year.