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What could a TBTF bank possibly do to deserve an official reprimand from their friends at the Fed? Bank Secrecy Act and Anti-Money Laundering (BSA/AML) related it appears, protecting flows of secrets and cash.
I hope it is not related to HSBC's position as the primary custodian for GLD and helping to 'start of the gold rush' back in 2009 by kicking out all the small fry to make room for more unemcumbered and leaseable London-ready bullion.
"WHEREAS, the Federal Reserve Bank of Chicago (the “Reserve Bank”) reviewed and
assessed the effectiveness of HNAH’s corporate governance and compliance risk management
practices, policies, and internal controls, and identified deficiencies..."
Press Release
Federal Reserve
Release Date: October 7, 2010
The Federal Reserve Board on Thursday announced the issuance of a consent Cease and Desist Order between HSBC North America Holdings, Inc. (HNAH), New York, New York, a registered bank holding company, and the Federal Reserve Board. The order requires HNAH to take corrective action to improve its firmwide compliance risk-management program, including its anti-money laundering compliance risk management.
Concurrent with the Federal Reserve Board's enforcement action, the Office of the Comptroller of the Currency announced Thursday the issuance of a Cease and Desist Order against HSBC Bank USA, N.A., McLean, Virginia, for violating the Bank Secrecy Act and its underlying regulations.
A copy of the Board's order is attached.
Attachment (pdf)
There is not a lot of doubt in my mind that this action in the US stock indices is indicative of bubble liquidity, but unfortunately underpinned by weak, cynical hands and thin volumes, and unrelated to economic fundamentals. Some of this is the effect of the upcoming November elections.
You will know the economy is improving when the median wage and employment start increasing. There is no evidence of this yet. Jobs creation remains below the level of population growth.
The Fed created a monetary bubble in 2004-07 which resulted in a bull market in stocks, and spawned a massive housing bubble and bank fraud overhang, the latter of which remains unremediated and a serious impediment to genuine economic growth.
Any serious exogenous event can now lead to a significant correction without direct Fed intervention of a scale much greater than their current POMO activity. Fraud and insider dealing is pervasive, and the Congress is largely under the influence of the banks and corporations because of the existing process of campaign financing.
Gold corrected back to trend as we noted it might the other day, and said we were taking profits in gold and silver on the short term trades only.
This consolidation was predictable given the extension above trend. Long ago we said we expected gold to move to 1375 and consolidate after the breakout from the handle in the cup formation. This is of a common pattern. We may have already seen this consolidation off the spike up.
Gold will remain in a bull market until the fundamentals change in the real economy with regard to honest stores of value. If you do not understand this by now you may not do so until it is too obvious to do anything about it.
It is important to keep in mind that this is a trend projection.
An exogenous event or a change in environment such as a liquidity crisis and equity market crash will test and can certainly alter this trend. As traders we must be mindful of what the market tells us.
As you may recall, I like to use these kind of charts as indications of the progress of a market, rather than hard and fast rules.
For example, the correction we see today in gold is to be expected as we ran well above trend over the past few days. Is this the consolidation we have been expecting around 1375? Very possibly. That objective was set months ago and is more an indicative target than a hard buy or sell stop. After a breakout from a cup and handle, price almost always gets ahead of itself and undergoes a consolidative correction. So, there we may now be.
The equity market SP 500 December futures appear to be hesitating ahead of tomorrow's Non-Farm Payrolls report. It was at the top of a short term trend channel at 1163 with its lower bound at 1136. The breakdown of the NDX yesterday was indicative. That range in the futures is 2025 to 1965. A break of trend in the SP futures will set up a test of big support at 1120. The Feds seem to be all over these markets, so I prefer to play it tight, light, and short term until we see a confirmed change in trend.
It is the relationship of the current price to the chart that is most important, with time as a factor.
