Home Topics in Depth Economics Have The Big Banks Formed A Cartel To Rig The Prices Of Their Own Stocks?

  • Eggar (2063 posts)
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    Have The Big Banks Formed A Cartel To Rig The Prices Of Their Own Stocks?

    And, Are These Dark Pools Behind The Run-up In Bank Stock Prices?


    By Pam Martens and Russ Martens,
    February 27th, 2017


    Dark Pools: The Path To The Next Financial Crisis?

    The biggest banks on Wall Street, both foreign and domestic, have been repeatedly charged with rigging and colluding in markets from New York to London to Japan. Thus, it is natural to ask, have the big banks formed a cartel to rig the prices of their own stocks? And, are these dark pools behind the run-up in bank stock prices?

    This time last year, Wall Street banks were in a slow, endless bleed. The Federal Reserve had raised interest rates for the first time since the 2008 financial crisis on December 16, 2015 with strong hints that more rate hikes would be coming in 2016. Bank stocks never do well in a rising interest rate environment because their dividend yield has to compete with rising yields on bonds. Money gravitates out of dividend paying stocks into bonds and/or into hard assets like real estate based on the view that it will appreciate from inflationary forces. This is classic market thinking 101.

    Bizarrely, to explain the current run up in bank stock prices, market pundits are shoving their way onto business news shows to explain to the gullible public that bank stocks likerising interest rates because the banks will be able to charge more on loans. That rationale pales in comparison to the negative impact of outflows from stocks into bonds (if and when interest rates actually do materially rise) and the negative impact of banks taking higher reserves for loan losses because their already shaky loan clients can’t pay loans on time because of rising rates. That is also classic market thinking 101.

    Big bank stocks also like calm and certainty – as does the stock market in general. At the risk of understatement, since Donald Trump took the Oath of Office on January 20, those qualities don’t readily come to mind in describing the state of the union. Prior to the cravenly corrupt market rigging that led to the epic financial crash in 2008 (we’re talking about the rating agencies being paid by Wall Street to deliver triple-A ratings to junk mortgage securitizations and banks knowingly issuing mortgage pools in which they had inside knowledge….






    and for further reading, as suggested in the article





    Koko, arendt, Late Bloomer and 5 othersEnthusiast, Depaysement, morgwynn, Ichingcarpenter, Doremus Jessup like this

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  • Ichingcarpenter (4122 posts)
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    1. Also see this interview with author of ''All the president's banksters''

    here:      https://jackpineradicals.com/boards/topic/dark-journalist-interviews-all-the-presidents-bankersauthor/

    • Eggar (2063 posts)
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      2. Sounds interesting

      Wondering what motivations made her decide to Write about this? Somebody coming from where she came from. Sounds intriguing on it’s own.

      • Ichingcarpenter (4122 posts)
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        3. She is like a Snowden

        Who was full blown pro NSA etc until he found out the truth.

        • Eggar (2063 posts)
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          4. Snowden wasn't making ungodly sums of Money at his Job.


          I Have heard her name before – probably on one of Thom H.’s Show a good ways back.  I will watch what you have presented & have to do some reading up about her. Still somewhat cautious of Why, though


          Thanks for the Link!


  • JimLane (1463 posts)
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    5. Stock buybacks by an issuer aren't considered rigging

    It often happens that large corporations (banks or otherwise) buy back some of their own outstanding shares.  They part with some of their available capital in order to boost the price of the shares that remain outstanding.  The shares are bought from investors who choose to sell at the offered price.

    The formation of a cartel requires that there be a small number of suppliers.  The suppliers agree among themselves not to sell at the price that a completely free market would set.  Instead, each adheres to an agreement to sell only at a certain minimum price.  I don’t see how any big bank could exert cartel power over its own stock.  There are too any potential sellers — the individuals, pension funds, and mutual funds that own the stock.  For example, Bank of America has more than 10 billion shares outstanding.  Yesterday’s volume was more than 50 million, closing at $24.61.  If the bank decided that it wanted its stock to trade at $30 or more, there’s no way it could stop people from selling at $24 or $25 or whatever other price some buyer was willing to pay.