The Fed is now holding a massive $200 billion in paper losses according to fresh data released on Thursday by the central bank.
This week, the U.S. Federal Reserve reported losses surpassing $200 billion, based on data released on Thursday.
As of Wednesday, the Fed’s earnings remittance to the Treasury Department was recorded at negative $201.2 billion.
This figure represents a paper loss, which central bank officials have indicated does not hinder their ability to implement monetary policy.
However, the number figure is still quite startling.
The negative amount is classified as a ‘deferred asset’ in the Fed’s accounting.
The central bank needs to address this shortfall before it can start returning excess earnings to the Treasury, reports Yahoo Finance.
These losses are primarily a result of the Fed’s high-interest rate policies aimed at reducing inflation.
The Fed compensates banks and money market funds for holding cash at the central bank to maintain desired short-term interest rates.
Two years ago, the Fed began experiencing losses, and in 2023, it has faced unprecedented deficits as the payouts for managing rates have exceeded the income generated from the interest on its bond holdings.
The Fed generates revenue through services provided to the banking system and from interest on its bond portfolio.
By law, it is required to return any profits to the Treasury.
For many years, the central bank has remitted significant amounts; research from the St. Louis Fed indicates that nearly $1 trillion was returned to the Treasury between 2011 and 2021.
The current loss situation is linked to an aggressive rate hike cycle that occurred from March 2022 to July 2023, during which the central bank raised its interest rate target from near-zero to between 5.25% and 5.5%.
In March, the Fed reported a paper loss of $114.3 billion for the previous year.
It paid out $176.8 billion to banks and $104.3 billion through its reverse repo facility, while earning $163.8 billion from interest on its bond holdings.
With the recent half-percentage point rate cut and the potential for further easing, the Fed is expected to experience a slower rate of loss moving forward, as it will incur lower interest expenses to maintain its target rates.
However, before it can return cash to the Treasury, it must first address the deferred asset, a process that could take years to tackle.
Yahoo Finance reports that so far, the Fed has not faced significant political scrutiny over its financial situation, which has surprised some observers, including former central bankers.
But doesn’t seem to be the case all over social media.
Americans are indeed scrutinizing the Fed for its poor financial decisions and management of the U.S. economy.
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US Bank is at a critical juncture following recent acquisitions and technological updates, according to CEO Andy Cecere during the bank’s investor day.
However, Wells Fargo analyst Mike Mayo expressed skepticism, suggesting that the bank might benefit from new leadership.
“Andy, I love you, but I don’t love the results,” Mayo remarked, highlighting that while the bank presented a coherent strategy, it had previously failed to meet its targets.
Mayo questioned Cecere, a veteran of U.S. Bank for 39 years, about potential succession plans and whether the bank is considering external candidates for the CEO role. Gunjan Kedia, previously the vice chair of wealth and corporate banking, was promoted to president in May, positioning her as a likely successor.
In response to Mayo’s concerns, Cecere defended the bank’s investments in acquisitions and technology, asserting that these were essential to maintain competitiveness, even as profitability has lagged behind peers.
“It was a short-term bump, for sure,” he acknowledged, but expressed confidence in the bank’s improved positioning.
U.S. Bank, which acquired MUFG Union Bank in 2022, is committed to achieving its revenue and expense targets, with executives optimistic about positive operating leverage in the latter half of the year.
Mayo reiterated the need for fresh leadership, stating that U.S. Bank has the potential for better returns.
Kedia’s presence at the event reinforced her status as a potential successor, with Cecere noting her leadership in integrating acquisitions.
He acknowledged that while the technical aspects of integration have been strong, the go-to-market strategy needs improvement, an area where Kedia is now taking charge.
The bank highlighted the interconnectedness of its various business units, emphasizing its ability to bundle services effectively.
However, UBS analyst Erika Najarian cautioned that this remains a “show me” story, as investors await tangible results.
With approximately $665 billion in assets as of June 30, U.S. Bank aims to become a Category II financial institution by 2027.
The bank is focusing on expanding its branch network in high-growth areas and enhancing its digital capabilities through partnerships with Edward Jones and State Farm, particularly in regions where it currently lacks a presence.
Kedia mentioned a desire to acquire a southeastern lender but acknowledged the uncertainty of the regulatory environment, leading the bank to prioritize organic growth instead.
She described the strategy as disciplined and measured, aiming for a broader reach without relying on large acquisitions.
Cecere confirmed that while the bank might consider smaller acquisitions, its strategy will not hinge on significant deals at this time.
In the payments sector, vice chair Shailesh Kotwal emphasized the bank’s comfort with its current offerings, though he noted the fast-paced evolution of technology could necessitate future reevaluations.
Analysts expressed mixed feelings about the bank’s narrative.
Oppenheimer’s Chris Kotowski found the story compelling but questioned whether it was convincing enough, while others echoed the sentiment that U.S. Bank’s strong core business might not easily penetrate new markets.
As U.S. Bank navigates these challenges, the focus will remain on delivering results and responding to the evolving landscape of the banking industry.
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Market News Today – US Bank Now Faces Turning Point Amid Massive Criticism.
Citibank now fires a whistleblower for ‘underperformance’, after the former employee provided records requested by the OCC.
Citi has filed a countersuit against its former employee, Kathleen Martin, alleging that she was terminated not for refusing to falsify records for the Office of the Comptroller of the Currency (OCC), as she claimed in her lawsuit from May, but rather for being unable to properly fulfill the duties of her role.
Martin, who was let go from her position as Citi’s interim data transformation chair in September 2023 after nearly two years with the bank, had alleged in her lawsuit that she was fired for not agreeing to Chief Operating Officer Anand Selva’s request to conceal information from the OCC that would make the lender “look bad.”
In a revised lawsuit, Kathleen Martin has accused Citi’s Chief Operating Officer Anand Selva of intentionally deceiving the bank by wanting to misrepresent Citi’s compliance metrics to the Office of the Comptroller of the Currency (OCC).
Martin claims Selva sought to conceal information from the OCC that would have made the bank “look bad.”
However, Citi maintains that Martin’s termination in September 2023 was not due to her refusal to falsify records, but rather because she lacked the necessary “leadership and engagement skills” to effectively execute the role of interim Data Transformation Chair, which she had been appointed to after the previous chair, Rob Casper, departed the company.
Citi asserts that during Martin’s interviews and assessment for the interim role, it was identified that she needed to improve in areas like her “dogmatic nature, lack of innovation and lack of experience driving the execution of complex change across Citi.”
Once Casper left, Citi’s senior leadership, including COO Selva, determined that Martin could not successfully fulfill the demands of the interim chair position.
According to Citi, COO Anand Selva tried to help the plaintiff, Kathleen Martin, improve her performance in the interim Data Transformation Chair role.
Selva allegedly set up one-on-one meetings and working groups to facilitate better collaboration and working relationships with stakeholders.
Selva’s HR team also provided Martin with a senior mentor to support her development.
In May 2023, Citi leadership discussed a plan to improve Martin’s performance.
In July, Selva conveyed Martin’s mid-year review before she raised any concerns about his behavior.
Soon after, Martin contacted HR and expressed fears about her job security.
Citi claims that Martin “felt her position was at risk,” but the bank asserts that internal documents showed she “exceeded expectations” and that CEO Jane Fraser had commended her for her “gravitas” and ability to build “strong relationships” at the bank.
However, Citi says Martin failed to heed the feedback provided, and she was ultimately removed from the Data Transformation Chair role because she lacked the “executive level relationships” and leadership needed to successfully execute the data transformation efforts.
Citi says the data transformation work was too critical for the bank to tolerate Martin’s underperformance.
Citi denies Martin’s claims that she protested the reporting of a key metric accurately or that Selva objected to it.
The bank says Selva and Martin met in September 2023 to discuss reporting certain metrics using red, amber, and green scales.
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Political News Today – Trump Now Says He Plans To Bring Mortgage Rates Down To 3%.
Donald Trump now says Harris is a ‘threat to democracy’ after publishing to X, formerly known as Twitter, a series of his worldview.
The former President says Kamala Harris was the first one out of 22 people to quit when she ran against Biden.
“And now she’s a presidential candidate?,” posted Trump to Musk’s social media platform on Saturday.
“Kamala Harris is the Weakest Presidential Candidate in History on Crime.
She’s allowed millions of people to pour through our Borders, many from prisons, mental institutions and, indeed, terrorists, coming in at levels never seen before.
What gives her the right to run for President? She got no votes to Biden’s 14 Million.
She failed in her previous attempt, was the first one out of 22 people to quit, never made it to Iowa, and now she’s a Presidential Candidate?
This is a Threat to Democracy!”
Kamala Harris is the Weakest Presidential Candidate in History on Crime. She’s allowed millions of people to pour through our Borders, many from prisons, mental institutions and, indeed, terrorists, coming in at levels never seen before. What gives her the right to run for…
Harris has recently been criticized for switching sides and opinions on proposals, with Trump supporters stating his beliefs and messages have remained consistent over the years.
“Donald Trump is surrendering to his advisors who won’t allow him to debate with a live microphone,” Harris posted to X.
If his own team doesn’t have confidence in him, the American people definitely can’t.
We are running for President of the United States. Let’s debate in a transparent way—with the microphones on the whole time.
Donald Trump is surrendering to his advisors who won't allow him to debate with a live microphone. If his own team doesn't have confidence in him, the American people definitely can’t.
We are running for President of the United States. Let’s debate in a transparent way—with the… https://t.co/mjyaiUTwAA
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