The Federal Reserve, the symbol of American financial hegemony and the most authoritative bank in the world, has been sued, and the ones who sued it are actually its own sons, the American Bankers Association and the American Chamber of Commerce. What they are actually representing behind this is the interests of Wall Street, including Merrill Lynch, Goldman Sachs, Morgan and other big Wall Street banks as well as the American business community. Why do they have the courage to sue the Federal Reserve?
The reason these associations sued the Federal Reserve is related to the stress test that the Federal Reserve has been conducting on the U.S. financial sector. This stress test is set up to ensure that banks have sufficient capital adequacy to cope with crises during financial crises and that no systemic risks occur.
After the subprime mortgage crisis in 2008, the Federal Reserve significantly increased the capital adequacy ratio of banks in order to ensure the stability of the US financial system. This made the financial system safer, but at the same time it also made banks like Morgan Stanley and Goldman Sachs more restricted when doing business, and the large amount of capital margin also reduced the efficiency of their capital utilization. Banks have been quite dissatisfied with this!
To put it bluntly, it is the conflict between the Federal Reserve and the incoming Trump. Everyone knows that Trump has always disliked Federal Reserve Chairman Powell. During his own term, he criticized Powell for raising interest rates many times, and during his gray hair period, he repeatedly called on Powell not to cut interest rates. However, Powell cut interest rates by 50 basis points during this election, which was obviously on the wrong side of the wrong boat. After Trump takes office, he is likely to give Powell a hard time. The entire business community has obviously felt this trend and is taking advantage of Trump's desire to relax regulation to put pressure on the Federal Reserve.
On the other hand, it is not only the banking association that is following suit, but also the popular Musk, who recently tweeted that the Federal Reserve now has 24,000 employees, which is absolutely too many and needs to be laid off. According to the Federal Reserve's annual report last year, the Federal Reserve does have about 24,400 employees, and the annual salary expenditure is 43 trillion, which is equivalent to an average annual salary of 180,000 US dollars per employee. What are they doing?
They are divided into several categories. The first category is economists and research scholars who collect market information and analyze the Fed's next monetary policy to provide a basis for the Fed's next policy making. The second category is traders who trade U.S. Treasury bonds in the open market. The third category is the bank regulators, who are the people who are complaining about banks now. Finally, there are some IT administrative and other support staff. These 24,000 people do sound too many and too exaggerated. No wonder the Federal Reserve lost more than 60 billion U.S. dollars last year. Now the Fed is basically in a situation where everyone is shouting and beating it.
Next year, the Fed's rate cuts will be reduced from four to two times. Last week, the U.S. stock market experienced a major correction. The entire financial market is furious with the Fed. Will Powell give in to the market and Trump, and slowly start more intense rate hikes to get the market back into a KTV state and give a good harvest in 2025? Let us wait and see!
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