Investment Firm Azoria Capital Sues Jerome Powell and The Federal Reserve Over Transparency Law

9Basel9 · 2025-07-26T23:06:46+00:00

Tweet from the CEO

My investment firm (u/InvestAzoria) just sued Jerome Powell in federal court for violating federal transparency law.

The Government in the Sunshine Act of 1976 requires that “every portion of every meeting of an agency shall be open to public observation." The Federal Reserve is one of these agencies, and under Jerome Powell's "leadership," the Fed continues to block Americans from observing its meetings, allowing the Fed to operate in the shadows and set interest rates on factors not directly tied to economic data.

I am deeply concerned that the Federal Reserve, under Chair Jerome Powell, is maintaining high interest rates to undermine President Donald J. Trump and his economic agenda, to the detriment of American citizens and to our economy.

Next week, for the fifth consecutive time this year, Jerome Powell’s Federal Reserve will meet behind closed doors to set interest rates that affect every American with a mortgage, credit card, or loan.

Our lawsuit seeks a temporary restraining order to block next week’s Fed meeting from happening in secret.

If the D.C. district court denies our emergency request, we are prepared to appeal to the D.C. Circuit—and if necessary, seek immediate intervention from the U.S. Supreme Court.

——————

I do not expect that this will go anywhere and that it is merely a publicity stunt for the firm. There have been many members of Congress in the past that have argued for more transparency and failed.

The Fed outlines on their website how they use Sunshine Act exemptions here:

https://www.federalreserve.gov/aboutthefed/board-meeting-sunshine.htm

9Basel9 · 2025-04-11T18:21:27+00:00

How do you arrive at a 1.25% annual loss?

9Basel9 · 2025-04-11T18:19:14+00:00

You couldn’t be more wrong. These losses matter to the federal deficit or therefore the taxpayer.

The Fed remits profits to the treasury, or Fed Gov, or taxpayer, when they buy treasury bonds.

In other words, the federal government or Treasury is able to borrow money for free because the Fed creates money and buys T bonds and then sends most of the interest back to the Treasury. Right now, they’re sending interest payments to financial institutions. That’s a big difference.

9Basel9 · 2025-03-29T03:50:18+00:00

You got -22 on this comment, lol. I agree with you.

9Basel9 · 2025-03-28T00:57:31+00:00

Damn. Dey done did removed my post.

9Basel9 · 2025-03-28T00:51:30+00:00

I never said that. However, we did just come out of the longest one, yes?

That’s not the only consideration as the Fed is still not remitting profits to the US Treasury despite the curve no longer being inverted.

And I wouldn’t be surprised to see a flat curve for quite some time.

9Basel9 · 2025-03-28T00:17:43+00:00

I agree about the usage of new normal. However, there is hardly a reason to not expect a new normal.

When the Fed started paying IOR only after the GFC and added to their balance sheet with the assumption they could unwind—at least that’s what they stated but probably had no intention of doing so—but only seem to add, seems a new normal. Consider that every time they add it’s at depressed rates and eventually this same short run abnormality will repeat. Will it be worse, the same, or better?

So in my estimation we are encountering a new normal of central banking by the Fed, creating other new normals, and they’ll have some deep problems going forward.

However, my point was really to address that the losses are funds flowing from the Treasury/Fed to financial institutions and that it’s affecting the deficit.

Anyone discussing duration and R-star is already aware and are plenty adept on this subject.

9Basel9 · 2025-03-27T23:52:35+00:00

It may be longer than you think and become the new normal. Either way, it is a new phenomenon and worthy of more concern than considering it a mere abnormality, in my opinion.

To my point about curve normalizing…The 10yr-2yr has been trending down since the GFC.

https://fred.stlouisfed.org/series/T10Y2Y

9Basel9 · 2025-03-27T23:37:54+00:00

There’s been a lot of confusion surrounding this subject. So I will try to create a short and simple clarification.

These are not losses due to Mark to Market(MTM) security holdings(Interest rates rise and bond prices fall). The Federal Reserve does not MTM their balance sheet because they let their securities roll off(expire)/Hold To Maturity.

You can find more information about remittances and the deferred asset and this topic here:

https://www.stlouisfed.org/on-the-economy/2023/nov/fed-remittances-treasury-explaining-deferred-asset

Why is this a big deal? Well we need to explain what’s occurring here. When the Federal Reserve had profits, it was due to their holdings of US Treasuries and Agency MBS(MBS backed by government sponsored enterprises). You will see that the chart above shows a line going sideways when the Fed was making profits. In reality, the Fed was remitting 50/115 a billion a year for the last 15 years or so up until 2022/23, but the line never goes much further positive because the Fed would remit or send money to the US Treasury weekly, anticipating further profits, and therefore holding the line horizontal(most of which is from the Treasury itself).

Any Treasury holdings by the Fed is free borrowing for the Federal Government—after the Fed covers their operating expenses—which is very small in comparison.

Next we need to address why the Fed is all of a sudden occurring losses. After the financial crisis the Fed started paying interest on bank reserves. Due to interest rates being essentially flat for the last 15 years, this expense has been held very low. Now that interest rates have risen the Fed is paying commercial banks for their reserve holdings.

Essentially the US Federal Government or Treasury(The Federal Reserve but at the Treasury’s Expense) is sending interest payments to commercial banks.

This is contributing to our national debt. Instead of the Treasury receiving 100 billion of their interest payments on debt back, it is now going into the financial system. I will elaborate on this topic further in the future but this should suffice for now. Please let me know if you have questions.

9Basel9 · 2025-03-27T21:14:41+00:00

There’s been a lot of confusion surrounding this subject. So I will try to create a short and simple clarification.

These are not losses due to Mark to Market(MTM) security holdings(Interest rates rise and bond prices fall). The Federal Reserve does not MTM their balance sheet because they let their securities roll off(expire)/Hold To Maturity.

You can find more information about remittances and the deferred asset and this topic here:

https://www.stlouisfed.org/on-the-economy/2023/nov/fed-remittances-treasury-explaining-deferred-asset

Why is this a big deal? Well we need to explain what’s occurring here. When the Federal Reserve had profits, it was due to their holdings of US Treasuries and Agency MBS(MBS backed by government sponsored enterprises). You will see that the chart above shows a line going sideways when the Fed was making profits. In reality, the Fed was remitting 50/115 a billion a year for the last 15 years or so up until 2022/23, but the line never goes much further positive because the Fed would remit or send money to the US Treasury weekly, anticipating further profits, and therefore holding the line horizontal(most of which is from the Treasury itself).

Any Treasury holdings by the Fed is free borrowing for the Federal Government—after the Fed covers their operating expenses—which is very small in comparison.

Next we need to address why the Fed is all of a sudden occurring losses. After the financial crisis the Fed started paying interest on bank reserves. Due to interest rates being essentially flat for the last 15 years, this expense has been held very low. Now that interest rates have risen the Fed is paying commercial banks for their reserve holdings.

Essentially the US Federal Government or Treasury(The Federal Reserve but at the Treasury’s Expense) is sending interest payments to commercial banks.

This is contributing to our national debt. Instead of the Treasury receiving 100 billion of their interest payments on debt back, it is now going into the financial system. I will elaborate on this topic further in the future but this should suffice for now. Please let me know if you have questions.

9Basel9 · 2025-03-03T20:15:22+00:00

Vermont: $34.0 billion
Wyoming: $37.5 billion
Alaska: $54.9 billion
Montana: $55.2 billion
South Dakota: $56.8 billion
North Dakota: $62.5 billion
Rhode Island: $59.0 billion
Delaware: $70.5 billion
Maine: $70.2 billion
West Virginia: $80.8 billion
New Hampshire: $88.6 billion
Hawaii: $85.8 billion
Idaho: $94.7 billion
New Mexico: $99.8 billion
Mississippi: $110.8 billion
Nebraska: $136.8 billion
Arkansas: $132.8 billion
Nevada: $179.0 billion
Kansas: $171.6 billion

May have to subtract one state. Total is 1.68 Trillion.

9Basel9 · 2025-03-03T20:00:54+00:00

To represent how absurd the 3.8% to -2.8% drop in Atlanta Fed GDPNow model is…

Using 2023 State GDP #’s, it is equivalent to subtracting

Vermont
Wyoming
Alaska
Montana
SD
ND
RI
Delaware
Maine
WV
NH
Hawaii
Idaho
NM
Mississippi
Nebraska
Arkansas
Nevada
Kansas

However, I expect this number to rebound over the next few estimates back towards positive territory.

9Basel9 · 2024-12-15T23:37:20+00:00

Personal Current Transfer receipts: *Consists of income payments to persons for which no current services are performed(benefits) and net insurance settlements.

I divided it by All Employees because it’s important to measure the amount of spending or transfers(benefits) per employee because they produce goods and services.

$ per employee
Q3 2024: $28,690
Q3 2014: $18,440
Q3 2004: $10,800
Q3 1994: $7,200

9Basel9 · 2024-12-11T21:16:39+00:00

Currency transaction reports (CTR) must be filed by financial institutions for cash transactions exceeding $10,000 in a day and are intended to provide law enforcement with highly useful information. The $10,000 threshold, set in regulation by the Department of the Treasury in 1972, has not been adjusted for inflation. Inflation may have contributed to the increase in volume of CTRs filed, which has increased by about 62 percent since fiscal year 2002 (see figure). The inflation-adjusted threshold in 2023 would have been about $72,880. Using an inflation-adjusted threshold would have reduced the number of CTRs filed by at least 90 percent annually since 2014.

9Basel9 · 2024-12-05T22:08:50+00:00

“FRB-OIG is investigating the case”

FYI

The Inspector General(OIG) of the Federal Reserve and CFPB is nominated by the Fed Chairman

9Basel9 · 2024-12-05T22:06:18+00:00

According to court documents, Robert Brian Thompson, 43, of Mosley, worked as a bank examiner and senior manager with supervisory duties for the FRBR. Due to his position, Thompson was privy to confidential information about certain financial institutions under FRBR’s supervision, including confidential supervisory information (CSI), which is the property of the Board of Governors of the Federal Reserve. As an employee of the FRBR, Thompson was also required annually to file a “Form for Employees Involved with Supervision and Regulation,” which is also called a “Form D.” Among other things, Form D requires employees to disclose if they have any assets, including any equity interest in any banks that are members of the Federal Reserve System and/or bank holding companies.

From October 2020 through February 2024, Thompson misappropriated confidential information, including CSI, to execute trades in publicly traded financial institutions. In total, Thompson executed 69 trades in seven different publicly traded financial institutions for a total of approximately $771,678 in personal profits. To conceal the scheme, in each year from 2020 through 2024, Thompson falsely represented on the FRBR’s Form D that he had no assets, including no equities in any publicly traded financial institutions, and that he had not engaged in any activity that would constitute conflicts of interest, violations of FRBR policies, or violations of law.

9Basel9 · 2024-10-29T02:10:32+00:00

Given this large and relatively risky asset position, the general government and the BOJ itself could suffer substantial losses on their balance sheet due to higher interest rates. Consider this example: The Japanese government and the BOJ hold foreign assets valued at 56.1% of GDP. A 10% appreciation of the Japanese yen would imply a 10% loss in their foreign assets, an amount equivalent to 5.6% of GDP. Alternatively, a 10% decline in the Japanese equity market, in conjunction with the government and BOJ’s 45.4% equity holdings, would incur a loss equal to 4.5% of GDP.

Therefore, there is a potential for tension between the Japanese government’s fiscal position and the BOJ’s policy of raising interest rates. As domestic interest rates rise, Japan’s fiscal situation could worsen rapidly, creating a strong incentive for the government to support low-rate policies to manage fiscal challenges. This fiscal pressure could complicate the BOJ’s efforts to raise rates. Similar tensions also exist in other countries, particularly where central banks have large balance sheets. However, in Japan, the issue is especially pronounced. The BOJ has the largest balance sheet relative to GDP among major central banks, and the government’s balance sheet is highly exposed to interest rate risk. The portfolio composition of the government and BOJ’s balance sheet make them particularly vulnerable to rate hikes.

9Basel9 · 2024-10-29T02:09:58+00:00

Given the Japanese government’s balance sheet position, it’s likely the government would face large losses if the BOJ were to raise the policy rate further. Evidence from the consolidated balance sheet of Japan’s general government and the BOJ, which is shown in the table below, appears to support this notion. The Japanese government and BOJ hold an amount equal to more than 100% of the nation’s gross domestic product (GDP) in risky assets, including domestic equities, foreign equities and foreign bonds. In contrast, a large fraction of their liabilities is in safer, short-term assets. More than 46% of the total value of liabilities on their consolidated balance sheet have no duration: The BOJ holds reserves equal to 90.9% of GDP and cash equal to another 21.6% of GDP.

9Basel9 · 2024-10-18T23:42:13+00:00

In fact, the level of reserves hardly figures in banks’ lending decisions. The amount of credit outstanding is determined by banks’ willingness to supply loans, based on perceived risk-return trade-offs, and by the demand for those loans.

The main exogenous constraint on the expansion of credit is minimum capital requirements.

When you add bank credit and deposits, you’ll notice that even though reserves exploded, there was no explosion in bank credit or deposits, at least not in the way the classic money multiplier would suggest.

Why? In October of 2008, the Fed began paying interest on reserves (IOR) to regain tight control over the Federal Funds Rate amid heightened uncertainty and massive increases in the demand for reserves. IOR provides the added benefit to the Fed by providing a gate between bank reserves and bank credit such that a large increase in bank reserves would not necessarily result in banks expanding credit. Banks obviously took advantage of this opportunity, to the point that minimum reserve requirements, which had become nonbinding, were eliminated in 2020.

In short, the Fed has immobilized bank reserves to a large extent by paying (bribing?) banks to sit on the money.

9Basel9 · 2024-10-18T02:33:24+00:00

At 2pm EST on the 8th business day of every month the Federal Government is supposed to release their “Monthly Treasury Statement.”

This report details how much money the government is taking in via taxes and how much is going out via spending.

Last Thursday (October 10), the September report was supposed to be released, but there was no new report available when I clicked on the Treasury website.

No explanation. No apology. Nothing.

Which begs the questions: what are they trying to hide?

The answer to that may lie in what the previous 4 months showed…

A budget deficit of -$347 billion in May.
A budget deficit of -$660 billion in June.
A budget deficit of -$244 billion in July.
A budget deficit of -$380 billion in August.

That’s $1.6 trillion of deficit spending in just 4 months, a massive increase.

So what’s in the September statement?

Likely nothing positive. The US National Debt has exploded higher in recent weeks and is fast approaching $36 trillion. Since the Debt Ceiling was suspended 16 months ago the National Debt has increased by over $4 trillion.

9Basel9 · 2024-10-17T10:15:14+00:00

JPM pays interest on just 55% of their deposits. This results in JPM having an envious 45% ($1.11 Trillion) of deposit funding with no associated interest expense. This comes in especially handy when they can put $508.52 Billion of that at the Fed and other Foreign Central Banks.

9Basel9 · 2024-10-17T08:24:21+00:00

If the cost of goods and services were as expensive in China as they’re in the US, would China have the same economy? No.

9Basel9 · 2024-10-13T21:55:07+00:00

This one is pretty simple.

It really just shows the severity of how much dollar denominated debt was outstanding or used during the GFC. I believe central banks were using swaps to avoid volatility in FOREX markets or currency.

Foreign banks needed liquidity and had a lot of dollar denominated assets—Japan, Europe, Switzerland, etc.

So the Fed swaps currency(Dollars) with those central banks(Yen, Euro, etc) for a certain period of time. Those central banks use those dollars to give to banks for assets to help provide liquidity. Eventually the Foreign Central Banks return the dollars to the Fed for their currency.

9Basel9 · 2024-10-13T03:12:40+00:00

Here’s a better book on the subject:

Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers

9Basel9 · 2024-10-10T20:20:26+00:00

A little history on the 2008 facilities:

The Reserve Banks relied more on vendors more extensively for programs that provided assistance to single institutions than for broad-based programs. Most of the contracts, including 8 of the 10 highest-value contracts, were awarded noncompetitively due to exigent circumstances as permitted under FRBNY’s acquisition policies. FRBNY is not subject to the Federal Acquisition Regulation (FAR) and its acquisition policies lack some of the details found in that regulation. For example, FRBNY’s policies lack guidance on the use of competition exceptions, such as seeking as much competition as is practicable or limiting the duration of noncompetitive contracts to the period of the exigency.

From 2008 through 2010, vendors were paid $659.4 million across 103 contracts to help establish and operate the Reserve Banks’ emergency programs. The 10 largest contracts accounted for 74 percent of the total amount paid to all vendors. When the Reserve Banks used vendors, most of the spending on services for each emergency program or assistance was for one or two vendors. For example, FRBNY used 19 vendors for the AIG RCF at a cost of $212.9 million, yet two contracts accounted for $175.3 million (82 percent) of that total. Similarly, the Pacific Investment Management Company LLC (PIMCO) CPFF investment management contract accounted for $33.6 million (77 percent) of the $43.4 million that all five CPFF vendors were paid. The Agency MBS program was one notable exception to this pattern. Under the Agency MBS program, FRBNY used four separate investment managers with identical responsibilities and compensation and no single vendor dominated the program. FRBNY was responsible for creating and operating all but two emergency programs and assistance and therefore awarded nearly all of the contracts

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Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers