Fed Bigger Threat To Depositors Than Wells Fargo – Ep. 199

The Peter Schiff Show Podcast

It looks like the U.S. stock market is going to close out the 3rd quarter on a positive note The catalyst for the rally today is the big rally in Deutsche Bank; shares are up better than 14% They were in danger of going below $10 yesterday There were nervous about maintaining accounts with Deutsche Bank People were re-living memories of Lehman Brothers all over again I think the Obama Administration was beginning to get concerned The Dow was off about 200 points on the close yesterday When worries about contagion spilling over from European banks into U.S. Banks It wasn't good with these Wells Fargo Congressional hearings I am going to chime in on that later in today's podcast I think the Obama administration was getting nervous about precipitating another financial crisis before the election I think they gave a nudge to the Department of Justice which had been talking about a $14 billion fine on Deutsche Bank The rumors this morning are that they are nearing a settlement with Deutsche Bank for a much lower number; maybe around $5.5 billion Which is below the amount that Deutsche Bank had set aside to settle this So from $14 billion down to about $5.5 billion - this is causing a big rally in the shares of Deutsche Bank and in fact that is returning confidence to the entire sector I don't think that this means that the European banks or the American banks, for that matter, are out of the woods I still think there are a lot of problems in the financials, because as I said in a previous podcast,"They're damned if the Fed raises and they're damned if they don't" Negative rates are bad for the banks but rate hikes are also bad for the banks, based on their balance sheets I think there are still a lot of problems percolating beneath the surface for the financials As far as the Obama Administration is concerned, the key is to get everything through the next election without a crisis So I think that having the Department of Justice settle with Deutsche Bank for a much smaller number... You know that $14 billion fine was very close to what the Europeans were looking to fine Apple But I think the Department of Justice is more concerned about elections than the symbolism regarding Apple's fine So coming to an agreeable solution with Deutsche Bank that was lower than the markets had feared serves the Administration's purpose right now So that's where the rally is coming from today and of course the traders like to paint the tape a little bit going into the end of the quarter It's not just the markets that had a strong quarter - crude oil ended the day about $49 We have some kind of agreement among OPEC nations for production cuts And while that might be good for oil stocks, it's not going to be good for the U.S. consumer, who is already struggling In fact we did get a mixed bag on economic numbers out today The disappointing number was consumer spending, which for the month of August was flat; the anticipation was for an increase of .2% Personal income did manage to meet expectations with a .2% increase But that was about half the increase we got in the prior month Spending went down from +.4 (which was upwardly revised from the original +.3) to flat Higher energy prices, gas prices at the pump are simply going to eat into that consumer spending number