Over the past few months, at least when it comes to our economy, that famous line from Franklin Delano Roosevelt about "...fear, itself..." has been quoted more times than I can count. As far as I'm concerned, there's a quote from his successor which is much more appropriate for our time (and I've repeated it in a couple of diaries over the past year, but here it is, again):
"The only thing new in the world is the history you don't know."
-Harry S. Truman
Here's some very recent history (over the past few days, in fact) about what's going on with our economy, specifically regarding the Federal Reserve and the stock market, some--or all--of which is 'history you may not know'...
The stock market's completely batshit insane, right now. We're talkin' light years beyond just off the proverbial deep end.
Folks are not-so-quietly questioning the shell game that's occurring as our government goes quite out of its way to obfuscate the extent to which they're propping up our markets.
Recent stories are popping up which run the gamut, from bordering upon conspiracy theories (but with just enough validity to them to scare the crap out of anyone that bothers to learn more--SEE: "Is The Fed Enabling Foreign Central Banks To Swap Out Their Agency Debt Into Treasuries?") to increasing amounts of confirmed information that's beginning to find its way into the MSM and the financial trade press (confirming earlier, more vague reports) that tell us that illegal frontrunning has been downright institutionalized on Wall Street for quite some time--SEE: "Pipeline Executives Confirm Abusive HFT Practices Including Potential Front Running." Also see, this link.
We're talking record-breaking levels of insanity.
The type of insanity that brings a society to its knees, in fact. Barry Ritholtz had an interesting blurb on his blog today: ""Market Seems Broken" After Monster Rally, Lindzon Says."
"Market Seems Broken" After Monster Rally, Lindzon Says
By Barry Ritholtz - August 26th, 2009, 2:15PM
Both the Dow and S&P hit their highest levels of 2009 intraday Tuesday, and all seems well for the bulls. But Howard Lindzon of Knight's Bridge Capital isn't among them and candidly admits to being "clueless" about the rally at this point.
One reason is the big volume in shares of "bankrupt" companies such as Citigroup, Fannie Mae, Freddie Mac, Sirius XM Radio and AIG, which don't seem to be moving on any fundamental growth, says Lindzon, who is also co-founder of Stocktwits. There are "just no underpinnings of real growth," he says. "The markets seem broken."
The truth is that Treasury Secretary Tim Geithner says we really can't handle the truth. He tells us it'd be "problematic" for the public to know what's really happened over the past year, at least as far as the Federal Reserve is concerned: Geithner: "Fed Audit Would Be Problematic For The Country." (Watch the full video, available via the link, for more context.)
Geithner: "Fed Audit Would Be Problematic For The Country"
Submitted by Tyler Durden on 08/25/2009 14:34 -0500
It is the esteemed Treasury Secretary's opinion, that anything that has to do with demystifying why the Fed is hell bent on destroying the US dollar, killing the middle class, and allowing Lloyd Blankfein to purchase Larry Ellison's yacht collection, is squarely in the "problematic for the country" camp. Never mind that more than half the country (in fact almost two-thirds) have indirectly voiced their support for HR 1207. But at least it is good to know where Geithner's allegiances lie, and even better to see how good at totally perverting facts (not just taxes) the SecTres is.
And the punchline: "The true test of the Fed is the market..."
(Bold type, above, is diarist's emphasis.)
Maybe not so much...
What else can one say about a market where the stock of five completely bankrupt (to the tune of at least a couple of trillion bucks, and that's being nice about it) entities accounts for 30% of the overall activity in the marketplace? (See: "Five Financial Stocks Dominating Market Volume.")
Five Financial Stocks Dominating Market Volume
Submitted by Tyler Durden on 08/22/2009 12:37 -0500
Since the beginning of July, the most prominent feature of the market has been the divergence in volume between financials and "all other" stocks. While overall stock market volume has been flat if not down over the past two months, and a continuation of a long-term downward trend since the March ramp up, the volume in financial stocks has staged an unprecedented pick up.
--SNIP--
As the chart below demonstrates, five primary names have been responsible for the bulk of the volume in not just financials but across the entire market. The five stocks are Citi, AIG, CIT, Fannie Mae and Freddie Mac.
A summation of the individual volumes since March reveals an unprecedented dominance of the total market volume represented by just these five stocks, hitting nearly 2 billion shares on Friday, August 21.
Looks like the Securities and Exchange Commission (SEC) is still taking a nap!
But, luckily for us, the courts have trumped Geithner, at least on one matter, and that's in terms of the public finally knowing where a good portion of our money--$2 trillion to be exact--has gone. We're going to get the scoop on this, sometime over the next 72 hours: "Federal Reserve loses suit demanding transparency."
Federal Reserve loses suit demanding transparency
NEW YORK (Reuters) - A federal judge on Monday ruled against an effort by the U.S. Federal Reserve to block disclosure of companies that participated in and securities covered by a series of emergency funding programs as the global credit crisis began to intensify.
Reference for the case is: Bloomberg LP v. Board of Governors of the Federal Reserve System, U.S. District Court, Southern District of New York (Manhattan), No. 08-9595.
In a 47-page opinion, Chief District Judge Loretta Preska of the federal court in Manhattan said the central bank failed to show that disclosure would cause borrowers in the Federal Reserve System to suffer "imminent competitive harm," by stigmatizing them for using Fed lending programs.
"The board essentially speculates on how a borrower might enter a downward spiral of financial instability if its participation in the Federal Reserve lending programs were to be disclosed," she wrote. "Conjecture, without evidence of imminent harm, simply fails to meet the board's burden."
Monday's ruling comes as lawmakers and investors demand greater disclosure in how the government manages a series of programs designed to lift the economy out of its deepest recession in decades.
The case arose when two Bloomberg News reporters submitted requests under the federal Freedom of Information Act (FOIA) about actions the Fed took to shore up the financial system in 2007 and early 2008, including an expansion of lending programs and the sale of Bear Stearns Cos to JPMorgan Chase & Co (JPM.N).
After the Fed resisted the request, Bloomberg sued to compel disclosure...
So, we should start hearing the skinny on the true extent of our government's largesse to Wall Street--in dollars and senselessness--over the next few days.
And, I have a prediction to make on this: It's going to stoke the fires of outrage among the public even moreso than we're witnessing now.
I'd also like to say that, IMHO, there's an inherent flaw in terms of how the Obama administration has been reacting to much of this type of information, since a significant portion--if not all--of these bailouts that are about to be disclosed to the public were made by none other than former Treasury Secretary Henry Paulson, under the unwatchful eye of the Bush administration. So, once again, we'll have the Obama White House taking flak from the public about the matter, as they've done time after time--instead of pointing the finger of guilt where it belongs, towards the other side of the aisle--they'll sit there and accept responsibility, either tacitly or otherwise.
Isn't this totally unnecessary, to the point of being downright politically masochistic?
IMHO, it's a failed strategy. Where's some good old fashioned finger-pointing when we need it?
Oh, snap! I forgot...
We just told the world that the Republican-appointed holdovers/overseers of our economic crisis--the guys that helped get us into this mess in the first place--are doing such a good job undoing the problems they helped create, in the first place, that we wanted them to stick around.
Oh well, so much for any thoughts of successfully implementing political Plan A.
Instead, the folks in D.C. have opted for Plan B: If they can't dazzle us with their brilliance, they'll baffle us with their bullshit. Case in point: Look at who's going to be explaining to Main Street why the New York Fed pissing away $2-$3 trillion to Wall Street was, in fact, good for Main Street: "Labor Leader Chosen to Head of New York Fed Board of Directors."
Labor Leader Chosen to Head of New York Fed Board of Directors
Tuesday, August 25, 2009
Joseph Stiglitz has said that labor should have a voice in the setting of interest rate policy. Is this change at the New York Fed, the appointment of the AFL-CIO's Denis Hughes as the replacement to ex Goldman co-chairman Steve Friedman as chairman of the New York Fed, a step in that direction?
If it proves to be, it will only be by dint of miscalculation. This is clearly an image-burnishing move by the Fed, throwing a bone to critics. But letting labor into the tent may have unexpected consequences, simply by allowing someone who has not drunk the financial services industry Kool-Aid more influence (Hughes was on the board, but as vice chairman). This appointment is only until year-end, but if the Fed continues to be under political pressure, it isn't hard to imagine this appointment being extended.
The Journal's Deal Journal voices the opposite possibility, that labor is being co-opted...
--SNIP--
The Fed decision formalizes Mr. Hughes's role as chairman through the end of 2009...
So, just a day after they learn that they're going to have to explain to the general public (just a couple days from now) 'where the money went'--which was actually distributed by the NY Fed, by the way, back when Geithner was running it prior to coming onboard as Treasury Secretary in the current administration--the folks that run the show appoint the NY State AFL-CIO head to help do the 'splainin'...
If it wasn't all so insane, it'd be funny.
Some would almost think that things are returning to "normal."