EDITOR'S NOTE: As important a function as they play in the markets, Redditors sometimes crack us up. The Federal Reserve is supposedly an independent public and private entity. It answers to many masters, be it government or private bank stakeholders. It has authority over specific areas in both public and private spheres, but it does so only to the degree allowable by the government and its stakeholders (like any company, I suppose). So, when Redditors went ballistic upon learning that the Wall Street Banks “owned” the NY Fed, and that there’s some “cronyism” going on..well…what can you say? There’s this thing about a “cherry,” but I’m not going there out of fear of being insulting. Yes, banks have a lot of behind-the-scenes say in the Fed’s operations. Same thing with the government. And if that’s the definition of cronyism, where they all collaborate (read: collude) in a manner that benefits them, often at the expense of the regular folks, then there you have it. To all Millennial or GenZ Redditors: yes, it’s more f**ked up than you think; no, the world isn’t fair; and yes, it can get a lot worse.
We were attempting to hold the Fed, Big Media, and the Wall Street megabanks accountable with our article yesterday on mainstream media’s news blackout of the Fed’s release of the names of the Wall Street trading houses that got $4.5 trillion in cumulative repo loans from the Fed in the last quarter of 2019 – long before the first case of COVID-19 was reported in the U.S. on January 20, 2020. (The full tally came to $11.23 trillion in cumulative repo loans from September 17, 2019 through July 2, 2020.) But when a Reddit group that calls itself “Superstonk” spotted our article and posted it in their comment section, our website got caught in the crosshairs. The traffic to our article was so heavy at times that our website couldn’t be accessed from either a laptop or a cell phone.
Occupy Wall Street Protesters Outside the New York Federal Reserve, September 17, 2012. The chant was: “Banks got bailed out, we got sold out.” (Photo: Wall Street On Parade)
Here’s the timeline of what we know so far about what happened:
Shortly after lunch yesterday, I attempted to access a different article on our website to review data for another article I was working on. The site wouldn’t open. I tried my cell phone and got an error/timed-out message. I called our tech support team and was informed that we had plenty of bandwidth but too many people were attempting to access the website at the exact same time. Tech support said they were going to deploy some software to help the situation.
We have a free plug-in on our website that allows us to see traffic as it comes in to our website. We took a look there. One report looked very strange: the amount of people searching on Google for the title of yesterday’s article was huge. Our readers were apparently attempting to find a Google cache of the article since they couldn’t access the original article on our website.
At 2:41 p.m. EST, I received an email from an individual who said he had posted our article to a Reddit forum known as Superstonk and that it had “made it to the front page of Reddit.” We’re not savvy about social media but making it to the front page of Reddit can apparently be both a blessing and a curse. A blessing in terms of getting the story out to our fellow Americans, and a curse in terms of keeping our website running.
We decided to take a look at the comments section of Reddit’s Superstonk under where our article had been posted. Folks were outraged that this kind of cronyism is still going on between the Fed and the banks after their hubris during and after the financial crisis of 2008, and that the media won’t even report it to the public.
The rage on that aspect of our article was intense, then someone on Reddit Superstonk noticed this part of our article yesterday:
“Three of the serially charged banks (JPMorgan Chase, Goldman Sachs and Citigroup) are actually owners of the New York Fed – the regional Fed bank that played the major role in doling out the bailout money in 2008, and again in 2019. The New York Fed and its unlimited ability to electronically print money, are a boon to the New York City economy, which is a boon to advertising revenue at the big New York City-based media outlets.”
That really hit a nerve – as it should. One commenter calling himself ItalicsWhore posted this:
“Wait. The banks…own the New York Fed…and can loan themselves unlimited amounts of money at practically 0% interest… in secret…? What. The. F***” [Asterisks added.]
Then a person posting under the name d-Loop responded:
“Kinda makes the whole thing hit a little different with that piece of info doesn’t it!
“Everyone is out there digging for the reason they’d need that money in that timeframe, and I’m over here just trying not to throw up from the federal incest.”
“Federal incest” is an excellent phrase to add to the Wall Street/Fed lexicon. It particularly comes to mind when we think of the former Chair of the Fed, Janet Yellen, who went straight from her perch at the Fed to grabbing millions in speaking fees from the banks the Fed was in charge of supervising. Senior Reporter Jesse Eisinger of ProPublica Tweeted this: “Deeply troubling two-fisted money grab from banks by Janet Yellen. This is corruption, but isn’t called that because it’s so quotidian.” Eisinger added: “Sure, Yellen might think she can make independent decisions once in office. But how arrogant is it to imagine that money corrupts everyone but you?”
For more on that subject, see our report: Janet Yellen’s Cash Haul of $7 Million Is Just the Tip of the Iceberg; She Failed to Report Her Wall Street Speaking Fees from JPMorgan and Others in 2018.
Like so many before her, Yellen was rewarded for her fealty to Wall Street and her willingness to take its dirty money by being nominated and confirmed by the U.S. Senate as President Biden’s Treasury Secretary. Now, if you want more reasons to rage against “federal incest,” consider this: As Treasury Secretary, Yellen is in charge of approving all Fed emergency lending programs to Wall Street; as Treasury Secretary, she has control of a slush fund called the Exchange Stabilization Fund with which she is allowed to meddle in markets; as Treasury Secretary, she Chairs the Financial Stability Oversight Council (F-SOC) which is allowed to hold non-public meetings with the Wall Street regulators.
“Federal incest” also comes to mind when we think about the trading scandal involving the former President of the Dallas Fed, Robert Kaplan, and Goldman Sachs; and the former President of the Boston Fed, Eric Rosengren, and Citigroup’s Citibank. While the Fed was supervising both banks and pumping them up with stealthy repo loans, Kaplan and Rosengren had trading relationships with the respective banks. See our report: New Documents Show the Fed’s Trading Scandal Includes Two of the Wall Street Banks It Supervises: Goldman Sachs and Citigroup.
And for the cherry on the top of this grand pile of “federal incest,” consider who it is that’s investigating this unprecedented trading scandal at the Fed: it’s being investigated by the Fed’s Inspector General who reports to the Board of the Fed.
It’s pretty easy to see why they’re talking about throwing up on Reddit.
Originally posted on Wall Street On Parade.