Trip Mines of Monetary Policy Under Powell | QPOL Issue #42
Why First Republic Bank was persona non grata.
Ever since this recent “banking crisis” in the US took off, a question that’s been gnawing my brain has been “why First Republic Bank?” After the arguable hit job on SVB by the Team Fed (Powell, major NY banks and kin), it seems clearly evident that taking out FRC was in retaliation to the fall of the shadow banking operation that was SVB. As covered in my previous article, SVB wasn’t registered as a SIFI and the CEO (formerly of the SF Fed under Yellen) lobbied heavily that it not be forced to abide by the same laws normally regulated financial institutions follow. It was loose monetary policy under Yellen in San Francisco that allowed institutions like SVB to form in the first place to create shadow money to fund fronts for Davos’ agenda. It only makes sense why revenge was in order…but it goes a bit beyond pettiness and histrionics of globalist startup fintech bros.
The hit on FRC first started with Moody’s demoting it’s credit rating. That same week, worries of SVB contagion decreased valuations of all US regional banks as Moody’s “lowered its outlook on the U.S. banking system to ‘negative’ from ‘stable.’“ Yet the banks’ holes on their balance sheet were backstopped by the Fed and confidence has seemingly been restored for now, especially given the notion banks can now buy new treasuries that will produce higher returns which in turn will allow banks to offer interest (for once) on their depositors’ accounts.
Then I did some digging…
This highlighted section is the most telling…
FRC stopped issuing loans tied to LIBOR as early as 2018/2019. Seems pretty early on in the transition period from LIBOR to SOFR. Almost so early, it’s as if they’re making the statement “we need to get off this LIBOR shit pronto.” Remember, LIBOR is out the door June 30th, and all US issued debt and portfolios must be indexed to SOFR. Shadow banks (offshore dollars…or technically inshore dollars in the case of SVB) are indexed to LIBOR and severely effected and Powell has been raising interest rates.
To me, it seems very plausible this may have been a reason for Davos to make FRC first on their hit list. It would also explain why Dimon is so adamant about protecting it and why Davos wants to take it out. Could FRC be a conduit of JPM’s anti-LIBOR movement? Recall that JPM’s podcast Making Sense’s first episode debuted their first episode in a series titled Leaving LIBOR. At first glance, I figured this was just a typical letter most banks issued or published, similar to what the CME published when they announced the end of Eurodollar Futures trading. There seems to be a larger piece to this conflict though.
Below are some reminders of why the Eurodollar System (or Offshore Dollar System/ODS) is an abomination…
No thanks to macro thought leaders on twitter spewing disinformation, it’s made it all the more difficult for the common man to make sense of what’s actually going on and how the ODS works…
Remember, the Fed lead by Powell is fighting to destroy the ODS system to maintain the control of both America’s monetary policy and independence. The ability for the Fed to raise rates thanks to re-indexing newly issued US debt to SOFR is how this is being achieved. The egregious narrative from Jeff Snider that the Eurodollar System was a “decentralized/free market response to the Federal Reserve” is hypocritical to the highest degree. It’s globalist money outside of the jurisdiction of the Fed that under ZIRP comes back to bite America in the ass. As Danielle DiMartino Booth describes in her book Fed Up, the offshore leveraged loan market (as she described the ODS) disseminated the financial crisis and was the final gust of wind that brought down the stack of cards which caused the GFC.
Under Powell’s Fed, ZIRP is not an option, and the Fed Put is dead. Daddy Powell is not coming to bail your illiquid, insolvent ass out. These globalist-backed shadow banks like SVB are popping thanks to the rate hikes. I can’t imagine the amount of banks that are holding back from transitioning to SOFR because they are so deeply in bed with the shadow banking system that they can't rewrite their loans, swap agreements, and whatever other contracts they have in time to hedge themselves. This is the contagion that matters, and this is the bubble Powell is intentionally trying to pop. This is the deflation the Fed wants to see that will bring inflation back down to 2% (or whatever BS arbitrary number they wanna settle on). The Davos-backed shadow banks are fighting for their survival against Powell the hawk. They’re falling on the monetary trip mines that he has laid on the chess board of this financial war.
~ Phil Gibson