The Federal Reserve and U.S. Treasury recently made a big change to their banking rules: Big banks will now be forced to use the Fed's discount window (which was previously only used as a last resort by struggling banks) at least once a year. The Fed tried to argue that the last economic crisis was spurred by banks that didn't know how to use the window — so this new rule will act as a fire drill. But former investment banker Carol Roth sees through their "absolutely insane" spin. Carol joins Glenn to explain what's really going on here: The Fed wants to hide from YOU which banks are in trouble and grab even more control over the market. But Carol also brings some good news: This audience recently helped accomplish two "massive" wins in the fight against ESG.
Transcript
Below is a rush transcript that may contain errors
GLENN: We have Carol Roth on with us.
Hello, Carol. How are you?
I can't hear, Carol. There you go.
CAROL: Oh, great. I was saying, what a better way to start with the week than with you and your fabulous community. So off to a fantastic start.
GLENN: So let me give some good news to this fantastic audience. Big news from Florida.
The law that we spoke about, the last time that Justin Haskins was in town, in Dallas, we were talking to a Florida representative. It is working.
More than 100 Florida banks, including some huge nationally chartered banks, have just signed an agreement with the state, that they will not incriminate on the basis of customer's political views.
This is one of the main reasons why we wanted this in the first place. You can see the legislation. I'm going to tweet it out here in just a minute or so.
The legislation behind this. Is the same that we've been promoting since The Great Reset book was released in January of 2022.
Same legislation that lawmakers learned about when they came to the summit. That we hosted at Mercury One in Dallas.
And it's the same one that I talked about when I was on the stage, at the pro-family legislation conference, in November of 2023.
This is a massive, massive win.
Donald Trump has also formerly committed on the campaign trail, of stopping banks from discriminating on the basis of politics.
The whole point of the bill that we were pushing in -- in Florida.
If other states pass bills like the one in Florida, we will win and destroy ESG.
We're getting an update. Hopefully, we will have one at the end of the show, on how many states are taking this up.
Florida, again, is leading the way. Donald Trump, says, he is right with this.
We need your state. To follow Florida's lead. The banks are jumping off. And they are actually signing promises, that they will not consider your politics. When looking at loans or anything else.
That is huge, Carol. Huge.
CAROL: That is huge. And I want to point out, Glenn. This is the second grassroots win, that we heard about, within the last seven days.
And I am so proud of you and everyone in your audience, who has been saying, I'm not sure that I can make a difference, but, you know, I'm going to try. I'm going to write a letter. I'm going to send some comments in, whether it's to my state representative or governor or to whoever it is. We're seeing that when enough people stand up, they can make a difference. And that should inspire and fire everybody else up, to continue this. Because it is working.
And so I -- by the way, I have to say -- participated in some good news on the program.
GLENN: I know. I know. I know. That will end soon. Your mood won't improve much.
But I do want to point out, what you just said. Talk about what happened last week, that was another massive win.
And it started with this audience.
CAROL: It 100 percent started with this audience. And it started with you, and Marlo Oaks, the Treasurer out of Utah, who brought to our attention these natural asset companies. And the fact that the New York Stock Exchange had gone to the NCC, and said, we want to list them. We want to list these companies who can control and manage natural resources.
And we said, no. This isn't going to happen.
And so you brought this to everyone's attention.
We came up with a template.
People from this audience. Hundreds of people from this audience came, emailed me personally for that template.
Sent it in.
And there was so much pressure. That the FCC didn't even get to rule. The New York Stock Exchange withdrew the role because of the pressure from patriots, from this audience.
It was an absolutely huge victory. So now we've got this -- we've got the ESG. We have the nondiscrimination.
We have momentum. So certainly, lots more work to being done.
But everybody should take that moment, to take a victory lap. It doesn't mean you have a party for the rest of the year.
But for a quick moment to say, I made a difference. If I participated. And you didn't do it the last time around, next time around, do it the next time.
Because the more people who do it, the more of a chance, we have to make that difference.
GLENN: So we will get into why this is so critical, that you understand the power that you have.
And really, know it. It's critical.
Make sure you're listening next hour. Because I will show you massive moves now being made, on silencing voices like ours, to alert people like you.
So you may have to be the replacement vote. Voice.
To currently others.
It is the digital ghettos are being made, right now.
And they're going to start putting people behind those walls, soon.
Okay. So, Carol. Let me explain the discount window. And see if I have it right.
Discount window, at the fed.
Think of a bunch of windows, at a bank. Where you walk up to a window.
The discount window is where banks, if they walked into the fed.
Which is the bank of banks.
So all those windows.
There are bankers at that window.
No people like you. And the discount window was the kind of shameful window at the end, that everyone could see.
And you could walk up to the discount window if your bank was if trouble.
And say with, I need to borrow some more money. I need it here.
Because we're getting dicey on the books. And all the bankers can look and see who is in line with that discount window.
And they say, bank of Georgia is in real trouble.
So it was shameful. And nobody wanted to go up to that discount window.
After 2008, they took all that shame away. And now you can walk up and go, yeah, man, right!
Are we all in trouble. You bet?
Can you give me some more money. Do I have that right?
CAROL: Pretty similar.
It's unfortunate.
Because the discount window does sound like a place at Nordstrom, where you maybe get a discount on some goods, right?
But you said, it is sort of -- has a stigma attached to it. Because within the banking system, within the plumbing, as you noted.
Banks lend to each other on a regular basis.
And if you're in good shape, you may go. And if you have a liquidity need, overnight or for short-term, you may go to another bank, and you may get a loan.
And that's actually what the fed funds rate sets that target rate of lending at, that we hear.
We hear, we will go up 50 basis points. We will go down. That set interbank lending rate.
The discount window, as you mentioned is at the fed. Funny enough, it's not even at a discount. It's actually at a premium to the fed's fund rate. Because banks who can't get the money elsewhere, have to go to the fed. We've heard the name -- the phrase, the fed is the lender of last resort.
And that's if you're in line at that discount window. It's because you've got nowhere else to go in order to get that money for your liquidity.
GLENN: Correct.
CAROL: So while that information isn't reported, usually on a case-by-case basis. For about two years.
You don't know specifically.
There's enough details that participants in the market can infer who is going to those windows.
And then also, it's a very important market signal.
Because in the aggregate.
If we're seeing a lot of loans being taken down, via the discount window.
Which is reported on a regular basis.
We can infer there is trouble in the banking system. So like we did last March, when there was a banking crisis, we saw this huge spike in discount window usage. So I think that that kind of pieces this all together.
GLENN: Okay. So now what has the fed done?
CAROL: So there is a new rule that is being worked on. This had been rumored to be happening for a long time.
And now it's finally come out. It's between the fed, the treasury. And the -- I believe it's the FDIC. And they are planning to say, well, because there's so much -- well, actually, they're not saying -- I'm getting ahead of myself.
They're basically saying, they will introduce a new rule. That if you are a bank over a certain size. I think that $100 billion is the assumed cut-off point. That we're going to force you, to use the fed discount window, every year on whether you need a loan.
Whether you don't need a loan. Whether you can borrow for another bank.
It doesn't matter. And they will make sure you do it.
And the reason is, they think you're so stupid.
They say, well, the reason why we had this crisis in March.
Wasn't because we had all of these underwater, you know, securities on bank balance sheets.
No, no, no. That wasn't the issue.
It was because they couldn't figure out how to use the discount window.
So this will be like a dress rehearsal, or a fire drill. So if you do it on a regular basis, now you know. And we can avoid the other crisis.
Which is absolutely insane. And if you believe that, I have a bridge to sell you.
GLENN: That is like, that is like cops saying, yeah. Well, we -- we have to fire our guns. You know, at people. Once in a while, because otherwise, if something happens, we won't know how to fire guns at people.
I mean, that's crazy.
Of course they know how to use it. That's their job to learn how to use it.
It seems to me, they are forcing these banks to do it. So we don't know who is in trouble anymore.
CAROL: Bingo. So there's this great newsletter called FX Hedge.
And they brought this out into the open, and sort of surmised the different reasons why this is happening.
And I'll add my own flavor into it. But like I said, the obvious reason, is that they're trying to obfuscate the information. The signal. They're trying to hide what's about to go in the banking system. So that's the clear reason. The only reason why you would force everybody to do it. Because, of course, if you're part of the fed system, you will know how to use the discount window. Big, huge banks, and they can't figure out how to use the discount window. It's absolutely insane. But it's also kind of -- if you go down the line, they must think there is some reason for them to hide this information. Which is the various issues and weakness which we have known for a while, remains in the banking system.
On top of that, this FX Hedge newsletter, also talked about the idea of consolidation. Something that you and I have spoke about, a lot within the banking system and centralization. That if the banks are no longer lending it to each other, and they are now relying on the fed, this is shifting the banking system away from, you know, more of a quasi-free market. To more fed-controlled system.
Which we know is something that we've been concerned about with CBDC. And, you know, the fourth reason could be these liquidity issues that we're seeing in the Treasury market, and the need for the fed to find ways to increase its balance sheet without calling it QE.
So lots of possible different reasons. But certainly, that first hallmark reason. That they're trying to hide information, and issues.
Within the banking system. Is just -- it's not only a head scratcher. But it's a red neon sign.
