The term “wildcat banking” refers to non-federally regulated U.S. state banking between 1816 and 1863, also known as the Free Banking Era. It resulted in widespread bank failures. A modern form of this approach would involve the government backing or backstopping (bailing out) the poorly regulated crazies that wildcat banking tends to attract. This occurs after the extractions are a fiat accompli.
We’ve written about U.S. Treasury Secretary Steve Mnuchin’s personal financial windfall with his group’s acquistion of IndyMac. This was effectively a wildcat bank seized by the FDIC and packaged to new wildcat “investors” with a full government backstop, removing virtually all the risk. [See “Trump’s Treasury Pick Mnuchin Explains Kleptocrat Slash-and-Burn Operations.”]
On Nov. 6, the New York Fed confirmed that its mucky muck president William Dudley will retire “in mid-2018.” Dudley worked at vampire-squid firm Goldman Sachs from 1986 to 2007. At the N.Y. Fed, he was in charge of buying and selling Fed assets and thus was heavily involved in bank bailouts — and the quantitative easing programs during and after the financial crisis. He was promoted to president of the New York Fed in 2009. Then, the N.Y. Fed acquired the assets that now constitute its $4.45-trillion balance sheet.
With this balance sheet now set to gradually unwind, the fun and corrupt part of the job is over — hence, Dudley jumps ship. If anybody knows where the bodies are buried, it’s this guy. Which wildcat crew he ends up with next will be a crucial tell.
With Janet Yellen removed as chairwoman, she will most likely also step down from her governor’s position. When Yellen goes, effectively what we have is a Fed governors’ walkout before the ship goes down. This would leave four slots to fill. Curiously, there have been three slots to fill for some time now. Many would say that this unsettling in itself. Enter the so-called Search Committee headed by your friendly representatives at Goldman Sachs/JP Morgan.
Trump has shown a proclivity to dip into the Carlyle Group’s corner of the swamp. In early October, he nominated (and the Senate quickly approved) Randal Quarles as a member of the board. During his confirmation hearing, Quarles said it was time to roll back the regulations that were imposed on banks after they nearly took down the global financial system in 2008. He will become the chief bank regulator at the Fed, filling the slot that became vacant in April, when Daniel Tarullo resigned “unexpectedly”.
Quarles was a partner at The Carlyle Group, a private equity firm of which new Fed Chair Jerome Powell is also an alum, as well as a host of other financial firms. Carlyle is ranked the No. 1 largest private equity firm in the world.
Suffices to say that The Carlyle Group is worthy of an article of its own, but the bottom line is that it’s a huge player in leveraged buyouts. For certain, Carlyle could do without those pesky regulators looking over its shoulder. It doesn’t take a rocket scientist to connect the dots. Don’t be the least bit surprised if Dudley do-right ends up with these boyz.
Wildcat finance is being greatly expanded under the Trumpenstein administration. In fact, this will be the nexus of my predicted looting under a Shock Doctrine scenario. [See podcast “Russ Winter Forsees Debt Slave Wars.”]