This Fed President Thinks Wall Street Banks Should Stop Whining

via wallstreetonparade:

Later this afternoon, Neel Kashkari, the outspoken President of the Federal Reserve Bank of Minneapolis, will deliver the keynote address at a conference on “Wisconsin and the National Economy” at the Madison campus of the University of Wisconsin. Tomorrow, he’ll be taking questions at a Town Hall in the University of Wisconsin’s Student Union on the La Crosse campus.

Given Kashkari’s recent remarks on his lack of sympathy for the whining New York bankers who are demanding a liquidity bailout from the Fed – and on their own terms – we’ll be watching closely to see what he has to say today and tomorrow.

Last month Kashkari gave a harsh and candid interview with Yahoo! Finance (see YouTube video clip below) about the complaints from New York bankers that the New York Fed was tardy in riding to rescue the repo loan market when it spiked from about 2 percent interest rates on overnight loans to 10 percent on September 17. (Repo stands for “repurchase agreements” which are collateralized overnight loans that financial firms make between each other.) The New York Fed has now jumped into that market to bring rates down and is currently pumping hundreds of billions of dollars to Wall Street trading firms (primary dealers) weekly. It has said this will continue until at least next year.

Kashkari said this:

“At the end of the day it’s banks jobs to make sure they’re funding themselves appropriately to meet their needs. So then when banks found that they were short of liquidity they said ‘oh my gosh, where’s the Fed to run and comfort us.’

“There’s something called the discount window that the Fed provides backstop funding to banks. It’s there. It’s available to be used. Banks don’t like to use it because they fear it might make them look a little bit weak.

“So I’m not very sympathetic with a bunch of banks saying ‘well you provided me with a backstop source of liquidity but I didn’t want to use that one. I need you to provide me another backstop source of liquidity whenever I make a mistake. I’m not sympathetic with that argument.”

The whining, pampered bankers of New York got the idea that the Federal Reserve, through its money spigot, the New York Fed, will ride to the rescue and design a labyrinthine concoction of bailout programs that are too numerous and complex for the public to track because that is exactly what the New York Fed did between 2007 and 2010. After the Fed lost its multi-year court battle to keep its bailout amounts secret and Senator Bernie Sanders attached an amendment to the Dodd-Frank financial reform legislation to audit the Fed’s bailout loans, the public finally learned in 2011 that the total tab the Fed spent to ride on its glistening horse to the rescue of Wall Street was $29 trillion.

 

 

 

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