Rescued by Vultures: Central Banks Are Bailing Out the Big Banks, Just Like in 2008

[Inside Wall Street with Nomi Prins]( Welcome to Inside Wall Street with Nomi Prins! It’s the only daily newsletter featuring the insights of renowned author and former Wall Street insider, Nomi Prins. Every day, Nomi shines a light on a massive wealth transfer she calls The Great Distortion. That’s the true cause of the permanent disconnect she sees between the markets and the real economy. And she shares ways you can come out ahead, if you know where the money is flowing. You’ll find all Nomi’s Inside Wall Street issues [here](. If you have questions or comments, send Nomi a note anytime [here]( or at feedback@rogueeconomics.com. Rescued by Vultures: Central Banks Are Bailing Out the Big Banks, Just Like in 2008 By Nomi Prins, Editor, Inside Wall Street with Nomi Prins In 2008, I was living in New York, just 20 blocks away from Bear Stearns. I had left Bear to join Goldman Sachs in 2000, but I still had many contacts from those days. When Bear went under in March 2008, the conversations with old colleagues were intense. What happened? Who knew? And how could a few bad positions take down a company that had connected us together? At the crux of Bear’s demise was a book of overleveraged subprime assets. That means Bear had borrowed way too much money to buy what turned out to be toxic assets. As Margot Robbie’s character put it in the movie The Big Short, “Whenever you hear the word subprime, think s**t.” The managers and traders of those assets were holding on to hope. They hoped that the price would recover fast enough, so they could sell them. They knew they might have to sell them at a loss. But they never imagined they’d take the whole firm down in the process. Ironically, one of the managers at the center of that debacle gave me a book when I first joined Bear in 1993. The book’s title is Innumeracy. And it’s based on the premise that, when people hope for an outcome, they underestimate risk more than when they fear an outcome. For Bear, the clock ran out on hope in March 2008… Just like it has with other banks today. Recommended Link Millionaire Trader Reveals: [The One-Trade Retirement Blueprint]( [image]( This retirement method is unlike anything you’ve ever seen. In short: it’s a way to trade one unique type of investment over and over again… and potentially make all the money you need to fund your retirement. We call it the “One-Trade Retirement Blueprint.” And it’s a dream come true for folks at or near retirement. [Get the details here – including the name of the ticker that makes this all possible.]( -- Rescued by Vultures As I learned working on Wall Street, banks know when other banks are hurting. They know when they are wounded, too. The weaker ones hope they’ll survive. The stronger ones wait and watch for an opportunity to swoop in. When I worked at Bear, and later at Lehman Brothers, no one there thought those banks wouldn’t survive a crisis. We thought ourselves way too smart to go under. And yet, in 2008, they didn’t survive. Right before Bear went under, word got out around the financial community that it was up to its neck in assets it couldn’t afford. And so rival hedge funds and banks began shorting – or betting against – those assets. [Featured: Must See! Florida Dad “hacks” gas pump. What happens next will STUN you…]( Bear had taken out loans, largely from JPMorgan Chase, to buy those assets. As things unraveled, Bear couldn’t come up with the money fast enough to pay those loans back. So JPMorgan stepped in. At the request of the government and the Federal Reserve, they agreed to buy Bear for $2 a share. The press called it a “rescue,” as if JPMorgan were heroes, not vultures. Eventually, JPMorgan raised its buy price to $10. Still, it was a fire sale price. To put it in perspective, on March 14, 2008, Bear’s stock closed at $30 a share. At its peak it had traded over five times that. But JPMorgan didn’t want to take too big a risk with Bear. It feared its assets would fall more in value. So, it got what it wanted. The Fed kicked in $30 billion to get the deal done. In other words, the Fed took the risk – with taxpayers’ money. Six months later, [Lehman also went belly-up, after selling some of its U.K. assets to Barclay’s](. Recommended Link [Bear or bull market, this highly successful trader has shocking new forecast]( [image]( Nobody believed Larry Benedict’s prediction in February 2020. The DOW plunged 3.5%, and he told CNBC, “It seems like there’s much more to come.” Within a month, the market plummeted 34%. Then, nobody believed Larry at the start of last year, either. He predicted that “all the indexes will be negative for the year,” with the Nasdaq leading the way. Once again, he was spot-on. Anybody who followed his recommendations could be well in the black. Now, for the first time, Larry’s coming forward to share a brand-new forecast. [Click here to watch his interview right now.]( -- It’s 2008 All Over Again Today, we’re seeing the same playbook in Europe. On March 19, UBS agreed to buy Credit Suisse – Switzerland’s second-largest bank – for $3.2 billion. The way UBS took over Credit Suisse is just like March 2008. The Swiss National Bank is bankrolling the risk UBS doesn’t want to take on. And it’s framing that $108 billion of money printing as UBS’ “rescue” of Credit Suisse. [Featured: Strange Force Coming for American’s Savings? (Prepare Now)]( But it’s not just a Swiss problem. I say that because, after UBS announced its deal, the Federal Reserve followed. The Fed came out with something called a “joint liquidity operation.” That means the Fed directed a group of central banks – including the Bank of Canada, Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank… And together, they agreed to increase the frequency of their U.S. dollar swap line arrangements with the Fed. They bumped them up from weekly to daily. That means they can borrow dollars from the Fed more quickly. Recommended Link Expert who called the bottom in March 2020 and June 2022 releases new forecast: [“The Pain Is Only Going to Continue”]( [image]( [Click here for the name and ticker of his #1 stock.]( -- What This Means for Your Money Today This is a very bad sign for the private banking system. See, private banks use central banks as “lenders of last resort.” That means, if they have internal problems and can’t get money from other private banks, they can get money from central banks. That’s exactly what happened in the fall of 2008, when Lehman collapsed. The Fed doubled its foreign exchange swap lines with various central banks. In doing so, U.S. dollar liquidity went from $290 billion to $620 billion. I wrote about this in my 2018 book, Collusion. Here’s how I put it: This was the central bank equivalent of “the House” providing extra money to the gamblers at nearly no cost, so they could keep placing wagers until their spate of bad luck dissipated. And as regular readers know, that’s exactly the root of The Great Distortion we’re facing today. Thanks to the Fed and other big central banks, the markets are completely disconnected from the real economy. It started in 2008, when central banks cut rates to zero, printed trillion of dollars, and increased swap lines amongst themselves. But after the 2020 pandemic, all of these “emergency” measures became permanent fixtures of monetary policy. When central banks tried to tighten policy and raise rates to fight inflation last year, they caused a liquidity crisis. That means that banks don’t have enough money to lend out. Or they want to keep what they have in case they need to protect themselves. It also caused a confidence crisis – which is why people rushed to get their money out of banks like Silicon Valley. (For more on that, catch up [here]( We are in the midst of it now. So what’s next? For one, I wouldn’t be surprised if more big banks fail and get taken over by lurking competitors. We saw this move in the fall of 2008. JPMorgan took over Bear. Bank of America took over Merrill Lynch. Wells Fargo took over Washington Mutual… All with the Fed’s help. So look out for more fallout and acquisitions. Deutsche Bank is a big domino in the process of collapsing. Like Credit Suisse, it has shown weakness for months. French banks, like Society Generale and BNP Paribas, are also in trouble. For now, I would avoid investing in banks in general until this dust settles. Regards, [signature] Nomi Prins Editor, Inside Wall Street with Nomi Prins --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: Inside Wall Street Feedback). MAILBAG Yesterday, we asked if you believe the government caused the current banking crisis. Reader John feels that we should be asking a more important question… More important than what has caused the situation is the method being used to correct it. If the same entity that caused the dilemma is supposed to fix it, there will be no solution. How can black swan Powell and Co. bring 6% inflation down to 2% inflation as if that’s the cure-all number? They are trying to build a house with just a sledgehammer. The government officials are not involved in actually producing anything, and production is the only way out. They do not understand that production will bring down prices. – John F. Then, Ken recommends a book that Nomi and her readers may find interesting. And Melchor commends Nomi on her detailed analyses. I wanted to inform Nomi about a book, The Coming Battle, written in the 1890s. It features the same topics Nomi discusses about the nation: how the nation is formed, the Fed prints money, the Fed has control over the money supply, etc. – Ken F. I’m impressed by your insightful analyses. – Melchor M. Do you agree with John that, if the government has caused the banking crisis, it won’t be able to fix it? Does that government not understand that “production will bring down prices”? Write us at [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: Inside Wall Street Feedback). IN CASE YOU MISSED IT… [Expert reveals startling new prediction about America’s future]( Former Goldman Sachs Managing Director Dr. Nomi Prins has a new kind of prediction. If you have more than $1,000 in the bank, this could be the most important interview you see in the next 60 days. [Watch her bombshell prediction for America’s economy now.]( [image]( [Rogue Economincs]( Rogue Economics 55 NE 5th Avenue, Delray Beach, FL 33483 [www.rogueeconomics.com]( [Tweet]( [TWITTER]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Rogue Economics welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-681-1765, Mon–Fri, 9am–7pm ET, or email us [here](mailto:memberservices@rogueeconomics.com). © 2023 Rogue Economics. All rights reserved. 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