Wall Street banks reassure US Treasury amid big market falls

Mnuchin’s Busy Weekend Prompts Stock Futures ReboundMore
Mnuchin’s Busy Weekend Prompts Stock Futures ReboundMore
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26 December, 2018

Just prior to this CNBC report being released, CNN published an article citing people familiar with Mnuchin's call to the banks, and it painted a picture of complete confusion on all sides. Trump was reportedly not happy over the weekend with how Mnuchin handled an especially volatile market, which culminated with an unprecedented market drop on Monday - the Dow dipped by 2.9 percent and the S&P 500 fell 2.7 percent.

Earlier, Mr Mnuchin tried to dismiss reports that President Trump had discussed the possibility of firing the Federal Reserve chairman, after the bank raised interest rates last week. "The recent actions of the president and the Treasury secretary, however, have been erratic and are creating uncertainty and instability in the markets".

Secretary Mnuchin conducted a series of calls today with the CEOs of the nations six largest banks: Brian Moynihan, Bank of America; Michael Corbat, Citi; David Solomon, Goldman Sachs; Jamie Dimon, JP Morgan Chase; James Gorman, Morgan Stanley; Tim Sloan, Wells Fargo.

The year started with President Donald Trump promising big growth for stocks.

Bloomberg reported that Trump has asked one or more of his advisers to meet with Powell, a possible sign that he doesn't trust Mnuchin.

"The [bank's chief executives] confirmed that they have ample liquidity available for lending to consumer, business markets, and all other market operations", the Treasury statement said.

The slide - generated entirely by confused messaging from Donald Trump and his administration, saw the wider U.S. market slide into the grip of the bear. Investors were concerned that Trump might fire the Jerome Powell chair of the Federal Reserve.

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'This is nonsense, ' the source said about Mnuchin and who worked with Trump during his 2016 campaign.

Mnuchin also spoke on Sunday with the heads of the six largest United States banks, who confirmed they have enough liquidity to continue lending and that "the markets continue to function properly".

"We've gone through situations before where it's absolutely normal for the secretary of Treasury to reach out to the private sector", Quincy Krosby, a chief market strategist at Prudential Financial, told The Wall Street Journal. The biggest decline since 1945 occurred in the 2007-2009 bear market.

The Fed is an independent agency.

The assurance comes in the face of repeated attacks on the central bank by the President, who most recently called the Fed the U.S. economy's "only problem" on Monday.

The move "smacks of desperation and nervousness", said Paresh Upadhyaya, a portfolio manager at Amundi Pioneer Asset Management in Boston.

The market shakiness comes hot on the heels of the most recent interest rate hike from the US Federal Reserve, which took place last Wednesday (December 19) and saw the target federal funds rate rise from 2.25 percent to 2.5 percent. It was sitting at $1,268.90 per ounce as of 1:02 p.m. EST on Monday, a level not seen since June of this year.

Mnuchin on Sunday held a phone call with the six biggest USA banks, reporting on Twitter that the CEOs have "ample liquidity" available.


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