WHY Did The Banks Need Repo Bailouts From The Fed? | 2019

Register for the Emergency Briefing at https://www.nabers.com/repo

Today’s video addresses the question: Why did the banks need a repo bailout from the Fed? (2019 New Bailouts)

Read Caitlin Long’s excellent article on Forbes: https://www.forbes.com/sites/caitlinlong/2019/09/25/the-real-story-of-the-repo-market-meltdown-and-what-it-means-for-bitcoin/

Related Videos:

Fed Repo Bailout Explained https://www.youtube.com/watch?v=ZiEjqNeYIHw

Repo Madness https://www.youtube.com/watch?v=6eO6yDOIc9s

Are These Really Bailouts? https://www.youtube.com/watch?v=JxSsC0SVaUQ

Transcript:

Coming up. This is a story about how systematically there are absolutely crazy things going on that are hidden behind complexity and PhDs saying things like nothing to worry about. Here. We’ve got it all calculated as experts. Ultimately re hypothecation is like a game of musical chairs. The banks are playing it, the banks know that they’re playing it and right now we have signs, the banks think that maybe the music’s going to stop and they should probably go ahead and secure their chair. And when the music does stop, we’re going to find out that a lot of people who think they own certain assets don’t really own them. Hey everybody, Jeff Nabers here. In previous videos we’ve covered what’s happening with these fed repo market bailouts. Are they really bail out? And in this video I want to cover the number one question that has been asked in the comments below those videos.

And that is why are these bailouts happening? Specifically, I want to speak to the underlying securities involved. So the federal reserve is giving banks money and the banks are giving the fed securities, in most cases a us treasuries. So the reason the fed has to step in and do these transactions is because the banks normally do these transactions with each other, but they stopped more specifically. Let’s look at the risk and the return involved in these transactions. So these underlying treasuries are earning a rate of return of about 2% annualized. They’re supposed to be viewed as having no risk as if the government has no chance of defaulting. But the reason the fed stepped in is because of the rate of these repo loans in the marketplace Rose to 10% so if you think about the banks involved in these transactions, they’ve got treasuries that make 2% yet they need money so bad, they’re willing to borrow at a rate of 10% on the other side of the transaction.

You’ve got another bank who takes a look at a risk free 2% and essentially is signaling to the marketplace that is not risk-free. I am not willing to take that 2% treasury unless you compensate an additional 8% for the risk. That is a very big spread. This is why it’s very alarming. So the real question is what do the banks know that we don’t know? What would cause these banks to go from viewing treasuries as no risk to viewing treasuries as having so much risk that they need 10% interest instead of two? Well, I’ve uncovered two possibilities here. Number one, for treasuries to truly be risk-free assets where at 2% interest rate would be reasonable for essentially no risk, then you’d have to believe that the government would never default on its debt and that we’ll always be able to pay its debt. Okay, well, when you look at the government debt, the debt is going up.

Now, that in and of itself is not really a bad thing because as long as it has the ability to pay it back, no problem. But the debt to GDP ratio would be staying flat. If the government’s ability to repay its debt wasn’t getting worse and worse. Unfortunately, what we see is that the government’s debt to GDP ratio is increasing, which means that with every dollar the government borrows, in other words, with every treasury bond, the government issues, the ability for the government to pay that debt back is getting worse and worse and less and less likely. Additionally, the information that is just sitting in plain view that most people don’t like to talk about is that the government’s debt is much bigger than its published figures. When you look at this chart, the blue bars and the debt is the debt that everyone talks about, but if you want to talk about the total debt, you have to include the unfunded liabilities.

The unfunded liabilities are even bigger than the published debt and if you include those, our debt to GDP ratio isn’t 106% it’s over 300%…

This is how The Repo Crisis is Getting Worse
It looks like the taxpayers are on a proxy spending spree again.
The repo market is in total chaos.
Is the repo market the canary in the coal mine, signaling the next financial collapse?
The new repo market timeline that proves this crisis is NOT going away is revealed, right here, right now!
Don’t be caught off guard like so many before Lehman Brothers went bust. Watch this video to the end , to make sure you have all the most recent intel on the repo market bailout (QE4).
It is crystal clear that the corrupt Fed needs to be audited again. The last time the Fed was audited, they’ve found 16 Trillion damage not reported to the public that the Fed gave away to the big banks and corporations for the bank bailout of 2008. Do not underestimate the Fed and Treasury. These corrupt people are capable of printing unlimited amounts of paper, and at this moment, they are anxious and concerned that their crooked elite-super-rich favorite candidate trump could end up losing the next presidential election. So they will continue to print re and more.
Welcome to The Atlantis Report.
It all started in mid-September when overnight, the rates in the repo market skyrocketed by an unheard of 400%!
The Fed stepped in and injected liquidity like they always do, which is a fancy way of saying they printed more money, which will cause future inflation and widen the wealth gap, and gave it to the banks and financial institutions.
Of course, Jerome Powell came out and said the repo market crash was nothing more than a “glitch” and was only temporary. In other words, nothing to see here, move along.
But you know from watching my videos, once they started QE, they can never stop, and this was the latest round (QE4).
But Jerome Powell was adamant that what the Fed was doing in the repo market was NOT QE.
Even though that was the exact textbook definition.
Why will the Fed never admit the continued repo market bailout is QE?
Because by admitting they have to start QE again, they’re admitting QE 1,2, and 3 failed.

The market would then lose confidence, and we all know the entire economy is built on debt, asset prices, and trust.
For the full transcript go to https://financearmageddon.blogspot.com
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recommended economic and financial books :

Destined for War: Can America and China Escape Thucydides’s Trap? https://amzn.to/33RwG52

How an Economy Grows and Why It Crashes by Peter Schiff : https://amzn.to/33Tk8Ky

Bitcoin: The End Of Money As We Know It https://amzn.to/31TXAqX

The Death of Money: The Coming Collapse of the International Monetary System https://amzn.to/2L2688q

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39 thoughts on “WHY Did The Banks Need Repo Bailouts From The Fed? | 2019”

  1. Third option: banks themselves don't want to expand and can't lend in the Repo market. The fed is stepping in as the lender of last resort.

    The two options presented here assume the banks are all working on concert. The second option specifically is not possible in the Repo market because it would be highly illegal.

    The repo market is showing signs that liquidity (at least with certain as of yet unknown actors) is becoming an issue.

  2. Elizabeth Viverito

    Is it mainly a problem of rehypothezation of assets by debtors, or is it also a problem of a government mismanaging its purse by becoming indebted, and thereby devaluing its treasury bonds?

  3. Obviously, the high-wire balancing tricks done with trillions of dollars and which threaten all the rest of us – and the government itself – should be outlawed. The whole financial system needs to be examined by something like the "Consumer Financial Protection Bureau" which Elizabeth Warren pushed for. There needs to be some government agency, whose doings are transparent to the public and which educates the public on what it is looking into, to protect our financial system. I could imagine Warren or Sanders doing something like this, because they seem to be in favor of honest dealings and protection of the 'little people', but the problem with both of them is they also want to spend trillions on new programs with money we don't have. The whole problem is a bit esoteric for the public so they remain uninformed (though when the economy blows up next it will not only blow up our financial system, but perhaps our political system as well). The public will demand: "throw the bastards out!), and with good justification, but how do we get intelligent, non-bastards in? And will they remain non-bastards once they are in? I've seen videos on Youtube , like this one, setting out the problem. But so far I haven't seen anyone proposing a solution. Maybe, given the way things are, there isn't one?

  4. There are some banks that started using Repo money as loans to buy mortgage backed securities which pays about 4% or so and subprime auto loan backed securities. They can continue using borrowed repo money at 2% to buy securities that yield 4%. When repo interest rates went up above 4%, these banks started loosing money on these securities. The Fed is bailing them out by lending them repo money at 2% so that they stay solvent, to avoid another 2008 crisis. Basically, the same crisis is shaping up but this time the dead beat banks found a way to abuse the repo process to try to make a quick buck which is now starting to fall apart. If fed does not loan the money at 2%, these banks will fail which will cause a domino affect like in 2008 and bubbles will start to burst.

  5. So much for relying on bond ratings. These notes are supposed to be double-A rated. In fact we're probably safer in the Bs where maybe less of this is going on.

  6. I don't think rehypothecation is the problem here. In a rehypo of US Treasury, the collateral taker gets title to the bond. So it doesn't matter how many times its been rephythecated, that is, changed hands. Rather, I wonder if this phenomenon is being caused by some people taking dollars out of the banks that is causing a shortfall in the amount of cash the banks have.

  7. Another explanation for the sudden spike in interest for overnight loans is simply that there is an imbalance between the supply and demand for dollars. One often sees these spikes at year end when the banks need to show cash on their books, and is not indicative of rehypothecation, or the loss of confidence in the US government. Remember that the Fed Funds rate is a target held in place by the Fed Reserve and their dynamic open market operations. Despite their operations, the Fed can lose control of the target. In the current problem, we are told that quantitative tightening (QT) and newly imposed cash reserve requirements have made dollars scarce at times. In fact, the Fed has reintroduced a QE lite in order to create sufficient liquidity. Like everyone else, I wish the Fed would stop acting like the Ministry of the Economy. But providing liquidity is certainly within their purview. I hope they will have the good judgement to extricate us from many of the problems they have created. But casting doubt on the US Treasury’s ability to discharge its obligations is tangential to the issue of overnight, interbank lending.

  8. Foundups Michael Trout

    This is why everyone should buy the most scare uncorrelated asset #Bitcoin #btc the big PUMP is coming! Remember holding btc for 5 to 10 yrs. Imagine if all the collateral was actually listed on the #blockchain you wouldn’t have this issue.

  9. So it like when a private equity firms do corporate raiding of a company borrowing money to pay themselves for buying the company then selling the company assets and selling the company for more then they paid for it with more debt and less assets because people only look at the short gains only.

  10. My theory: the reason gold/silver and other precious metals are so low? Because MOST of it is not held but only paper positions AND there is PLENTY OF PAPER…and when da shit done hit da fan….you want to be holding the metal..not the paper. Not saying its going to happen now…because I called this 5 years ago…but it WILL HAPPEN. WHEN?? i wish i knew..but trust me…the minute the big banks start pulling out…you might want to pay ATTENTION.

  11. What no one wants to say is that the problem is coming from the failed Euro and the fact that Deutche Bank, among others, is way insolvent. When Europe finally goes it will eventually spread to the US markets.

  12. this is just total bs, stepping in to prevent Trump from losing the next election? It's quite clear that this dude is bias and probably doesn't like Trump. Anyway, the problem of the crisis stems from Europe. The Europeans never adressed the 08 crisis bad loans, which are still on the balance sheet of the banks. They just used accountancy tricks to keep a big scale banking collapse out. Next to that, if Deutsche goes belly up, you don't know which other banks in Europe will go too and you don't want to be left with EU sovereign debt that have an artificially low yield because of the ECB policy preventing EU government debts to collapse as then the entire EU/euro concept would be on the brink. Long story short; the US bankers just don't trust the EU bankers and as a result don't lend them money, leading to the repo crisis as the FED had to step in and be the middle man. But like all the other things of policy, it never really adresses the problem, just buys time. It's not that the underlaying problem goes away when the Fed stops intervening in the repo markets.

    The rest of what you hear on this youtube vid is also not true, QE never raised the velocity of money (which would cause inflation) in the real economy because it never got there, it went to the banks hoping that they would spend it in the real economy, but they didn't and they posted it back with the FED as excess reserves. On top of that governments are raising taxes substracting money out of the real economy so you end up with deflation… I mean c'mon, in Europe they've been at it for 10 years and still no inflation, the only thing the ECB managed to do is frying the EU bondmarket and their own balance sheet with owning 40%+ of all EU sovereign debts, to the point they can't stop buying bonds as there is no private investors that's going to buy an EU bond with such artificially low rates.

  13. This is beyond life support!
    The banks are dead! The economy is dead! No one wants to admit it!
    Trying to bury the body in fake cash!
    They can't bury the rotting corpse smell! Even by setting the pile on fire!

  14. Mainstream media is purposely keeping people away from important news like this. Instead, they fill the airwaves with nonsense and distraction.

  15. The Spoil Brats are out of control. You can't spank their butt's cause they have a camera phone and will call the police to arrest you.
    Time to Leave their game and Play the Crypto!

  16. People are living above their means. Don’t use your credit card. Stop buying new cars, rv’s, boats, expensive toys they lost value very quickly. Buy a 5 yr old car that runs well. Stop showing off build ur retirement account instead.

  17. After the impeachment fails they will crash the stock market. The day credit cards no longer work that's when the party is over.

  18. ANY SOCIETY THAT LOOKS AT KIM KARDASHIAN'S BEHIND THIS MANY YEARS IS A DEMENTED SOCIETY AND DOES NOT DESERVE TO LIVE..

  19. The REPO system fails because a critical mass of long term lenders are defaulting on their loans repayments, and the retail bankers are over exposing themselves with excessive lending than they can borrow from short term loans with rising interest rates over time. It's a double jeopardy scenario which will implode in due course as the greedy bankers, who are deemed too big to fail, once again gambled on the FEB bailing them out. Lessons learnt in 2007 was repeated by the new generation of younger Banking CEOs who thought they knew better than their predecessors.

  20. Eli In the Wolverine State

    The problem is the currency. It doesn't have the same value therefore they need more. So they can make same value as currency was. All over the world currency are failing. Not enough value. World is seeing the grand illusion. It's why Democrats will do anything to win including lies and false flags. The currency is worthless. It's not real money but means of control. Gold and silver are real money it's why they back currency with it.

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