The Fed U-Turn & Banking Flip (Warning).

man two hikes that is some click bait if

I do say so myself let's get into what's

going on with fed well we're back to

having the talk about the Federal

Reserve and this time the FED actually

exposes the banks well at least Neil

kashgari does Neil cascari went as far

this morning is suggesting that Banks

shouldn't have deposit ratio

requirements of less than 10 percent

they should be closer to quite frankly

40 percent now that's basically to say

that for every dollar of deposits that

banks have Neil kashgari who's a voting

member of the FED thinks that Banks

should have 40 cents on deposit now this

is uh dare I say somewhat probably to

the bankers extreme because even when we

talk about getting two 10 cents on the

dollar of reserves Bankers freak out and

they're like this is this is too

stressful you're causing too much undue

stress we can self-regulate we're fine

well Neil kashgarian will talk obviously

about this idea of a Fed pause as well

here shortly but Neil kashgari makes

this argument pretty strong and he says

Hey look

y'all say and y'all have always said

that you can self-regulate yet what have

you done the last 15 years well the last

15 years you've made us bail you out

three times you made us bail you out in

2008 you made us bail you out in 2020

during covid and you made his bailout in

2023

something leaves Neil kashgari thinking

hey maybe just maybe Banks don't know

how to self-regulate and quite frankly

how could you blame that the reality is

banks are motivated by profit

shareholder compensation uh not just uh

profit but also quite frankly by being

able to get a nice bonus when you're an

executive then you're able to generate a

lot of growth for the company because

you're able to attract more customers

well how do you attract more customers

to to a bank when you're a bankrupt well

the way you do it is by offering sweeter

loan terms which potentially are uh more

risky for example think about my first

experience ever in my career with a

local credit union which I'm forever

grateful for and I hope credit unions

don't go away I love Credit Unions

they'll stick around uh but I was able

to go to a credit union on my first

property and after I refine chance the

property and got a twenty percent down

conventional loan I was able to say to

the bank hey would you consider giving

me a home equity line of credit of up to

90 percent debt on the home uh without

mortgage insurance and they're like sure

why not and then there was an inflated

appraisal to boot so it's almost sort of

like the the credit unions are really

incentivizing like hey man whatever we

got to do we'll stretch every limit we

gotta we'll Grease the wheels of the

appraiser just to get you signing up at

our bank because of course what do they

do hey but Kevin you know we'll give you

that but um you know we could actually

get you another quarter point off the

interest rate if you set up direct

deposit with us oh we could get you

another quarter point off if you bring

some more deposits over it's all part of

the game right like why would anybody go

to a credit union over a too big to fail

Bank well the only reason is because

they have more competitive products but

by having more competitive products you

increase risk in the banking system Emil

Kashkari is right to say like hey well

the banking system has failed basically

three times in the last 15 years so it's

kind of fascinating to think about this

idea that hey maybe uh just maybe it's

possible the Federal Reserve uh and uh

and Congress are going to elevate uh

bank deposit requirements again Neil

kashgari requesting up to 40 cents on

every dollar and the reason he says this

is because look if there's a market

crisis when you have 40 cents on every

dollar of cash that you have deposited

well now you can cover all your mark to

Market losses remember how that works

with treasuries right let's say you have

a billion dollars of Treasury sitting

around and all of a sudden the market

softens to where you know treasure

yields Skyrocket and the bond values

fall 40 well at least you could still

cover your deposits will that be cool

I'll be cool cool to cover your deposits

imagine that a bank being able to cover

their deposits well that hasn't been

true this year so he actually doesn't

make a bad argument but unfortunately

what just ends up happening in our

economy is anytime there's a

strengthening of rules

the like one president down or two

presidents down just undo those rules

now this happened with Democrats as well

so this is by no means trying to be

political here but after the 2008

financial crisis we had Dodd-Frank which

set up these massive too big to fail

rules and and created some really big

restrictions uh especially on the big

four Banks the city the Bank of America

the wells the chase consider for a

moment JP Morgan I walk into JP Morgan I

I got all my bank accounts there and

everything and I'm like yo I want to

refinance 28 properties with y'all

they're like

we can only do four and I'm like you're

smoking crack I want 20 Fanny Freddy

loans let's go they could do it why

can't you and they go

out Frank I'm like oh that sucks they're

like but we could offer you some non-qm

loans and I'm like I don't want that

crap get that crap out of here I want my

30-year fixed Fanny Freddy no prepay

loan and they're like yeah no not from

the big four so I'm like all right fine

I'll go you know to another lender Like

A non-bank lender I go yo I want 20

loans for my wife and I on all these

properties and they're like no problem

would you like uh you know a donut to go

with it uh so so you do have some

regulations those regulations still

exist but then some other parts of

Dodd-Frank got rolled back like the uh

the audit requirements on banks with

more than 50 billion dollars in assets

some of those got rolled back to where

only banks over 250 billion dollars in

assets had certain uh uh stress test

requirements not necessarily audit

requirements stress test requirements

which to some extent is a form of an

audit but anyway uh Silicon Valley bank

then ended up fall falling right under

that threshold right at about 212 and so

did many of these others that have

failed so it's kind of crazy uh that uh

you know even though we might end up

getting more regulation we'll probably

just gonna keep having banking crises

going into the future uh kind of wild to

think about that that we just can't even

get banking straight Neil Kashkari made

this really good argument and then I

want to talk about his talk about a

pause he made this really good point

he's like you know it's kind of like a

nuclear reactor when you have a nuclear

reactor your goal is to create as much

energy as possible because you know you

want more jobs you want to expand you

want to put another you know Silo up or

whatever y'all call it uh the problem is

when it ends up failing it's not the

company that is solely responsible it's

the government coming in and bailing you

out to make sure that everybody around

that reactor doesn't you know freak out

like another Fukushima you know knock on

wood I I personally think we should be

building more nuclear power plants not

less problem is nobody wants it in their

backyard you know but I mean look at

this disaster we've had with Russia here

nuclear power would just be so

incredibly logical and then you look at

what they're doing over in Europe

they're taking a spent uh uh fuel rods

and they're just burying them you know

miles under the ground in these massive

Caverns they have and it's like cool

nobody has to deal with it great

so uh you know because that's always a

concern too is what about the disposal

okay well there you go put it in a

cavern way down in the earth when people

what if it seeps through okay you can't

can't win everything I guess but anyway

you know Neil Kashkari talked a bit

about a pause as well and I really

thought his mental gymnastics here uh

I'll go ahead and say we're quite

fascinating and entertaining he he takes

his point of view that he's like look

look uh if if we happen

deposh

uh does this should be we can't hike

again

it's like it's hilarious because that no

once you pause you're done uh you're

done they're gonna tell us they're not

done once they pause but you can you

can't do that again because of what you

did in the 80s you're screwed by the

past in the past y'all did this stop

start stop start stop start and you

don't want that because as soon as you

do that you send signals to the market

that you have no freaking idea what

you're doing and you double down on

reiterating that you literally have no

credibility and you continue to give

evidence to the market as to why

once again you shouldn't be trusted so

unfortunately you're kind of screwed

because once you pause you're stuck in

my opinion now sure could inflation

really go nuts again and then we really

have to Paul volcker and raise rates

again I suppose in theory that's

possible there's certainly no leading

indicator of that coming uh you know is

is inflation plummeting exactly as fast

as everybody would hope no of course not

New York Times actually and I know the

New York Times I get it 50 of people

hear me oh my gosh cite my sources and

uh uh and then they freak out but the

New York Times uh actually had a good

good piece this morning on uh one of the

things that's keeping inflation high and

uh it's actually in their opinion used

car prices uh and and just car prices in

general so uh the New York Times said

car prices actually both new and used

new and used have quote remained High

contributing to overall inflation used

car prices have been so volatile and new

car prices actually continue to rise now

that's weird because we are getting more

incentives at the dealerships so you

have this bizarre way of potentially

measuring car prices that's contributing

to volatility partly because you've got

wholesale car prices which are all over

the place then you've got you know MSRP

prices where back in the day we used to

see uh cars sell for more than MSRP now

they're starting to sell for less than

MSRP partly because of incentives coming

in but there are also still some

lingering supply issues where even

though Supply chains are getting better

we're still not producing as much as we

were previously because we are kind of

still just recovering with the

semiconductor shortages which led to

fewer cars being produced and fewer cars

sitting on dealerships you know it used

to be you'd have cars everywhere and

we're still not back to those levels of

inventory so uh there there are these

ideas that even though wholesale car

prices have started to decline and more

incentives are coming signaling you you

know some potential easing in in pricing

strength for cars for cars alone are

holding inflation up so sure yeah there

are some things holding inflation up I

mean just look at Aerospace okay

Aerospace is crazy I mean that they

still have supply chain shortages like

if you want to understand supply chain

shortages and inflation buy a plane okay

don't do that it's a really bad idea uh

it's a very small reason somebody would

ever need to have a plane very small

okay uh so with that said now what what

does Neil say about a pause well he

argues that well again if we skip that

doesn't mean we're done yes it does if

you skip you're done because of history

but uh he makes this argument that look

I hope the market is right about

inflation falling we have to get to two

percent we can't move the goal posts and

and I you know last time I went on a

plane I I haven't seen any empty seats

economy still seems to be doing just

fine yes but that's also kind of talking

about two different issues here right

because remember we just need with the

Federal Reserve prices to flatten out in

other words we don't need prices to go

down that would be nice it'd be nice if

the grocery bill was smaller it was

lower but we don't need prices to you

know go back down what we need is

pricing to stop rice amazing as much as

it is and quite frankly that has nothing

to do with how many seats there are on

the plane and I think Neil kashgari

knows that even though he's making this

example you know what I've traveled and

it still seems like people are spending

people are spending because they have

extra money to spend and they still have

jobs that has nothing to do with

inflation we had a an economy where oh

my gosh guess what people spent money

and there was no inflation for the last

40 years before covet so so

realistically this idea when people's

just spending I don't know were we gonna

pause nonsense I think he really set up

the case here for we're going to pause

his argument for well the only reason I

would be convinced to pause is because

of the banking crisis you know by the

way I think we should have 40 deposit

requirements notice now how it all comes

together

ah you want 40 deposit requirements

which are five times as high as current

requirements are and because you're not

going to get those and because you're so

worried about the banking crisis you're

gonna let the banking crisis Define why

you got convinced to go with a pause

he's basically telling you yo look my

arm's getting twisted to pause so I'm

just going to talk up how bad the

banking crisis really is as the reason

for my pause and supporting a pause so

we could all come across as having a

unanimous opinion of pausing this is why

he's made making the argument

we'll just pause in June but but July we

might go back up okay Neil whatever so

in other words bottom line I think Neil

Kashkari just went up and told us in

your lifetime get used to banking crises

it's going to happen again A and B he

told you have you checked out Kevin's

programs on building your wealth and the

June 1st uh release of the AI course I

hope so I'll link down below of course

as usual and see so number one get used

to banking crises uh B courses linked

down below and see uh

pretty much guaranteed going to pause in

June unless we get some kind of crazy

CPI report uh the day before the meeting

which is kind of wild that the CPI

report comes out just the day before the

meeting that means j-pow is actually

probably going to get an early look he's

kind of teased that before that

sometimes when they have a meeting

really close to critical uh data they'll

pre-release the data to him which is

kind of cool you know somebody could

like hack into jpow's wi-fi that's

illegal don't do it but if you happen to

you'd be able to probably find out what

the CPI report was you know beforehand

and ah it could probably be some

benefits to that but anyway so this

gives you an idea about the latest the

Federal Reserve I I you know obviously

we're not going to be done talking about

the FED for a very long time and quite

frankly when I started uh really making

YouTube videos I was talking about the

FED back in 2017 that's all we could

talk about was the fed and uh back in uh

uh uh back up when I started my career

we were talking about the Fed so it's

just always bad

it's crazy talking about the Fed so much

I remember in high school I uh it was I

don't know it was the first day and the

teacher is just like asking questions of

these these high school students seniors

and they're like all right who knows who

knows uh uh who the uh Secretary of the

Treasury is and the chairperson of of uh

the Federal Reserve or who knows this

they're asking all these questions and

nobody's answering them and I'm like

here's the answer here's the answer

here's the answer after the class the

the teacher's like dude

do you want to join us in like AP econ I

think you'd do well I'm like nope I'm

playing wow no I had a job at Jamba

Juice I was starting with real estate so

uh for me I'm like no no no no no it was

scale back on the on the school and and

focus on the biz

um

yeah and then I ended up at UCLA which

was also kind of cool but uh yeah so

that's my take on the federal oh I gotta

push this button that's my take on the

Federal Reserve so uh yeah look same

same old same old but I I think the good

news is if you're looking for the FED

talking about a pause and reiterating a

pause that's exactly what we got here

it's good it is kind of fascinating

though that to think we're probably

gonna have more money craze he's common

about three banking crises in the last

15 years

he's right kind of wild didn't even

think about it

no anyway all right well good to see you

back we'll start talking about something

else

[Music]

so Bullard is back to yapping I thought

the topic was done and over for the FED

but no Bullard is back to yapping

yapping and yamping here you go Nick t

two minutes ago on the tweeters St Louis

fed President James Bullard whom keep in

mind is not a voting member of the FED

in other words

he really has no say okay does not

matter Kashkari is a voting member

Bullard not a voting member the

projection that rates would rise to

above just about five percent this year

was based on the idea the inflation

would come down pretty rapidly and GDP

growth would be around zero but those

things haven't materialized so far

that's true inflation higher and GDP

higher bowler thinks the FED will need

two more 25 basis point hikes this year

you've got fairly robust growth for the

US economy in 2023 and you've got

inflation that's not come down fast

enough for that reason I'm out well

actually he said I think we're going to

have to grind higher with policy in fact

Bloomberg's now talking about it let's

listen do this and I do think this is

important folks Bullard has been a

collegial outlier agreeing with others

that have been leading in charge

including the former New York fed

President Bill Dudley here but a while

back he was giving scope and scale to a

really significant reset in interest

rates without any Whisper of

disinflation I see a recapitulation of

that this morning Bullard saying

inflation staying too high one reason

one reason for more Ike's plural and

this were very plural this morning and

this is sort of the distinction between

the skipping of the June meeting or the

pause right the skip being there might

be more needed especially as you get

data that's come out hotter than

expected pretty much across the board

and what we see is well a better economy

and that may include new cars including

new expensive cars from Dearborn where

the perspective is on his world of Autos

Matthew Miller joins us from Dearborn

all right we're not talking about otters

right now we gotta finish with the FED

here so uh this right here is your

Bullard sell down right here you went

from you lost about 20 cents on the QQQ

there

so thanks Bullard

as you can see it really wasn't a big

deal relative to the rest of the

movement in the day probably because

he's not a voting member and guess what

his new

really new

to always the

SE like ah higher rates faster

In fairness early on I think he was

right when he's like let's just raise

rates and get it over with I was a big

fan for that like

like if you're gonna get punched I'd

rather get punched in the face

and then be over it rather than you know

this this dragging on that we've gotten

I mean you know who knows maybe maybe

there are particular reasons for that

but um I don't know this this Bullard

news to me is uh a nothing Burger again

not a voting member he's got it he's

Gotta Give he's the perfect person you

know what probably goes down to

something like this

neocashcari this is Jerome Powell you're

going to flip-flop and you're going to

agree with the pause we're going to be

unanimous

I don't know why Powell sounds somewhat

trumpian but it's a horrible accent no

matter what anyway you're going to pause

tell the world you're going to flip-flop

because uh you're worried about the

banks or something

and like oh j-pal I have this paper from

2016 where where I talked about the

bank's having 40 Capital requirements

oh sorry Neil uh yeah that's uh that's a

great idea why don't you use that to

explain why you're pausing okay j-pal

boy I can't wait to have your job one

day I'll just keep working hard and

hopefully get there one day

then Jay Powell has to call Bullard

Bullard

Neal's voting he's coming out today

as a pauseer I need you to say something

bearish

get on with Bloomberg or or text Nick T

we need two more hikes even though

you're not voting we need to counter

some of the bullishness this needs to be

a hawkish pause get it done no problem

Jerome

thanks

uh

uh I I don't know about you but

I just I just think that's probably

honestly how it happens like we would

probably all be quite embarrassed uh to

hear the phone calls that happen