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September 17, 2025  | This week, The Institutional Risk Analyst  is in Washington for meetings and also an unexpected speaking opportunity. Federal Housing Finance Agency Director Bill Pulte canceled an appearance at the Exchequer Club of Washington that was scheduled for today, so we naturally agreed to help. Instead of Director Pulte, T he Exchequer Club hosted Mortgage Bankers Association President Robert Broeksmit , former FHFA Director and Housing Policy Council head Edward DeMarco, and Whalen Global Advisors Chairman Christopher Whalen for a conversation on Fannie Mae, Freddie Mac, a potential IPO and movement out of conservatorship.  As we noted in our regular column in National Mortgage News , the GSEs have a long way to go before they are ready to function as public companies. First and foremost, the two mortgage enterprises have become entirely bureaucratic and ossified after almost two decades under government control. Basically the entire staff and leadership of the GSEs must be replaced and a culture of customer service created. A good model for the necessary transformation is available at Ginnie Mae during the tenure of President Ted Tozer (2010-2017). The Trump team at HUD and Ginnie Mae is quite strong, with deep industry knowledge and experience in 1-4s and also multifamily assets. In contrast, the bureaucrats who populate the GSEs seem to think that they are doing the mortgage market a favor. Many key people inside the GSEs have never actually worked in finance and have no grasp of how the industry creates residential mortgages and capitalizes these crucially important assets. Instead of working with the mortgage industry, the officials of the GSEs pretend to be regulators and lord over independent mortgage banks. But the secondary market for 1-4 family mortgages has changed a lot since 2008.  If Fannie Mae and Freddie Mac do not radically change their cultures and personnel, then we suspect that the large bank and nonbank issuers who dominate the upper end of the mortgage industry will chew them up and spit them out. Just remember, both the United States (and the GSEs) and JPMorgan (JPM) are "AA" credits, as we noted in our last comment . The US mortgage market is moving back towards a state where a growing portion of annual volumes are being done as private loans for larger assets and government-insured loans for smaller assets. The GSEs are being squeezed between inflation of home prices and large buyers of loans above the conforming limit and superior execution from government lenders at the bottom of the market. This week, the mortgage industry has been participating in “discussions” with the Treasury about the prospect of GSE reform. The discussions are being done in the ministerial style of Washington, with Treasury officials asking prepared questions, the market participants giving cautious answers and the junior members of the team furiously taking notes. These notes will be carefully stored in the same closet that houses the earlier work done on possible GSE release. But during Trump I, the massive appreciation in home prices c/o the Fed and QE was just starting. Remember, Remember the 1st of October Speaking of falling real estate values and rising mortgage default rates, we’d be remiss if we did not mention that Rithm Capital (RITM) has apparently won the bake-off to acquired troubled commercial real estate REIT Paramount Group (PGRE) , which traded as low as 0.3x book value a year ago but now is trading just 0.5x book. To us, PGRE gives new meaning to the term "road kill" in the world of commercial real estate, but remember that falling interest rates may not help all or even most distressed commercial properties. “After a lengthy bidding process, which included SL Green, Vornado, Blackstone, Empire State Realty and DivcoWest with Dubai-based Saray Capital,” the Real Deal  reports, “Rithm is poised to expand deeper into commercial real estate if the deal for the ailing REIT goes through.” While we have enormous respect for the team at RITM, we worry about one of the largest owners of Ginnie Mae servicing expanding into distressed commercial real estate when the market for 1-4 family loans is headed for a significant correction. Starting October 1, 2025, all of the COVID-era loss mitigation waterfalls go away and visible loan delinquency in 1-4s is likely to rise rapidly. Q: Do you suppose the folks inside the Trump White House, who spend much of the day watching Newsmax (NMAX) , understand that loan forbearance is about to end for tens of thousands of American households on October 1st? "The permanent FHA loss mitigation procedures that start on Oct. 1st have eliminated special forbearance altogether and consolidated the non-disaster forbearances (formal/informal) into just one forbearance," notes John Comiskey in his always insightful blog . He continues: "This change won't be nearly as impactful as the change limiting partial claims/modifications to 1 per 24 months or requiring 3 trial plan payments to get one at all, but for every scenario save a presidentially declared disaster area will now leave the forbearance decision entirely at the servicer’s discretion." Remember the timeline laid out by Freedom Mortgage founder Stan Middleman in our 2024 biography " Seeing Around Corners. " The Fed cuts rates in ‘25 & ‘26, the mortgage market has a mini boom and home prices go up even more, then we have a maxi home price correction ~ 2028.  Home prices are already starting to fall, but a very late FOMC rate cut will delay the correction for a couple of years and make the eventual reset deeper and more problematic for the mortgage industry and the GSEs as well. Something to look forward to in coming weeks and months. The Next Fed Chairman? A s Wall Street awaited the September decision from the Federal Open Market Committee on interest rates, we heard some interesting reports about the likely choice for Fed Chairman after the departure of Chairman Jerome Powell that we'll discuss in our next Premium Service comment. But what about the Presidents of the Federal Reserve Banks, who all roll off next year? The terms of Federal Reserve Bank presidents are for five years and expire on the last day of February in years ending in 1 or 6, such as 2026, 2031, etc. We noted on X yesterday that the Trump Administration may leave some or all of the slots for Federal Reserve Bank presidents vacant next year, unless the regional boards of directors of the 12 regional banks serve up candidates with sufficient MAGA credentials.  When Franklin Delano Roosevelt  created the centralized Board of Governors in Washington in 1935, he gave the Board veto power over the supposedly independent, bank-owned federal reserve banks. So much for central bank independence from partisan politics.  If we really want an "independent" central bank, get the Fed out of Washington, but that it the last thing that Wall Street or the financial media want. The Congress ought to abolish the FDR-imposed Board of Governors in Washington, create three more federal reserve districts in the western US, and turn the palatial Federal Reserve Board HQ on Constitution Avenue into an ornate homeless shelter. Keep in mind that when Congress passed the Banking Act of 1935, there was no meaningful debate on the creation of the Board of Governors. FDR was a dictator. In the next issue of The Institutional Risk Analyst , we’ll be looking at the consumer lenders as Q3 2025 comes to an end. We’ll also being reviewing our non-bank finance group, which now includes names such as Brookfield Management (BN) , Chime (CHYM) , and Circle (CRCL) .  Many of the fintech and coin IPOs that came out earlier this year have sold off from their offering prices. And remember that our Summer Sale ends next week. Recent Posts France Downgraded Below JPMorgan GSE Release? Really? Will Trump Sack Bessent or Pulte? The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

September 15, 2025  | In this edition of The Institutional Risk Analyst , we ponder the world of credit and investing as sovereign nations see their debt ratings sinking below that of global corporations. Meanwhile, the price of gold is reaching new highs. Then we set up the Q3 2025 earnings of the top-seven US depositories for subscribers to our Premium Service . As we surge into quarter end with equity markets at all-time highs and global central banks turning the money spigots wide open, are inflated financial markets headed for a correction?

September 12, 2025  | In this edition of The Institutional Risk Analyst , we consider the proposed acquisition of FirstBank Holding Company (FBHC)  by PNC Financial (PNC) . If the target’s name does not ring a bell, that’s because it is one of the bigger private banks in the US after Apple Bank  in New York. And PNC, of course, is one of the larger and better managed banks in the US. The $550 billion PNC ranked 16th in the WGA Top 50 Banks for Q3 2025 .  As the PNC press release notes , FBHC is in “a leading position in Colorado and a substantial presence in Arizona.” Colorado will now become one of PNC’s biggest markets and the deal adds 95 branches in both states.  However, the FBHC purchase is very expensive at 2.4x the $1.7 billion total book equity of FBHC. PNC has been sitting at ~ 1.3x book value for the past year. In fact, Citigroup (C) is the only top-five large cap bank in our top 25 group based upon three-month returns. PNC went down less in April, but then lagged the leaders in our bank test group, not exactly a rousing vote of confidence in the $550 billion bank. The acquisition of FBHC may not help. The chart below from YahooFinance shows Citi and PNC over the past year. Citi is up 4x PNC. We do not have a position in PNC. The traditional rule of thumb in banking is that paying anything more than 1.25x book for a bank is usually not recovered.  Is there any value creation here for PNC shareholders after paying aggregate consideration of approximately 13.9 million shares of PNC common stock and $1.2 billion in cash for FBHC? We don't see it. FBHC is a peer performer looking at Peer Group 1, which is the top 100 or so banks in the US by assets. The WGA Top 100 Banks includes all of the publicly traded banks in the US and the complete universe is available to subscribers of the Premium Service .   If FBHC were included in our test group, the bank would fall somewhere in the middle in terms of financial metrics, but we’d doubt that the $27 billion bank holding company would trade at 2.5x book. With the exception of fintech darling SoFi Technologies (SOFI) , most of the better performers in the group over the past 90 days are still trading below  2x book value. If we stare at the standardized data from the FFIEC for a few minutes, you’ll start to perceive that FBNH manages to achieve that middle of the pack performance by keeping operating costs and credit expenses very low. FBHC is in the bottom quartile of Peer Group 1 in terms of credit losses. Interest expense is likewise in the bottom quartile of large banks, but so is the yield on the bank’s loan book.  The average loan yield for Peer Group 1 is around 6% of average assets, but FBHC is a full point lower in yield at 5%. Net interest margin is below 3% vs 3.6% average for peers. Over 90% of the FBHC loan portfolio is in real estate, putting the bank in the 96th percentile in terms of loan concentration. The credit book is balanced about evenly between 1-4 family residential exposures and commercial real estate (CRE). The overhead expenses for FBHC are likewise in the bottom 10% of all large banks in the US, but PNC’s overhead expenses are above average. What happens to the value proposition of FBHC for PNC shareholders when the 95 branches of the target assume a cost structure like that of the rest of PNC?  PNC’s overhead expenses were 2.42% of total assets vs 2.3% for Peer Group 1 and 1.8% for FBHC in Q1 2025 (latest data available). While those credit metrics may look good from a distance, FBHC has been aggressively restructuring its commercial real estate (CRE) portfolio, modifying delinquent credits to keep the assets from sliding into foreclosure. The chart below from BankRegData shows that FBHC is significantly above peer in terms of modification of CRE loans. Importantly, modifications by FBHC for all loan classes are running about half (0.39%) of Peer Group 1 (0.6%) in Q2 2025.  CRE Loan Modification Source: FDIC/ BankRegData While FBHC does have $750 billion in unrealized losses on its securities book, lower interest rates will fix that problem -- eventually. The bank's securities portfolio is a bit of a mess, with an average yield on all securities of 2.6% vs 3.3% for Peer Group 1. The MBS portfolio is yielding 2.35% vs an average of 3.14% for Peer Group 1 as of Q1 2025. FNMA 2.5s for delivery in September are trading 84 bid this AM. Hello. Of note, however, is the fact that the conservatively managed FBHC has little in the way of goodwill or intangibles. So the equity that PNC has agreed to purchase at 2.5x book is real enough, but the question remains about the outcome for the commercial loan portfolio.  We think that PNC is overpaying for FBHC in terms of the overall acquisition and that the assets of the target are likely to underperform as the bank is merged into PNC. FBHC had an efficiency ratio of 52% in Q1 because of the low overhead cost, but the same measure at PNC is 62%. The overhead cost of PNC is significantly higher than FBHC, meaning that the assets and deposits of the target will need to be repriced accordingly. But the kicker may be the CRE portfolio, which may not be fixed by lower interest rates. In the near-term, we do not expect this transaction to help PNC's equity market performance, but in a market showing telltale signs of asset price inflation, a lower interest rate environment may ultimately lift all boats. Just don't be disappointed if PNC continues to underperform the leaders in the bank group. We worry that CRE is the loan performance problem today, but FBHC could also catch a 2x4 in the face two years from now when the overheated CO residential mortgage market corrects significantly. That is a systemic risk that faces much of the US banking industry. The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

September 10, 2025  | Premium Service  | In this edition of The Institutional Risk Analyst , we update our readers on the process for releasing Fannie Mae and Freddie Mac from government control. As we have reported earlier, the very complex undertaking is being run in an ad hoc fashion since most of the key decision makers have still not been confirmed by the Senate. Because of that political logjam in the Senate, w e have doubts as to whether Stephen Miran or any other Trump nominees will be confirmed by the Senate next week.

September 8, 2025  | Premium Service  | In this edition of The Institutional Risk Analyst , we look at two new IPOs in prospect this week. Mortgage-tech HELOC lender Figure Technology Solutions  and UK payments platform Klarna Group , which is finally coming to market after years of anticipation. These are two deals that look a lot like previous deals in mortgage tech and payments space, respectively. And remember, our summer sale ends at the end of summer.

September 5, 2025  | Last week we took profits from a number of high-beta stocks in our portfolio. Why did we take some double digit gains in Nvidia (NVDA)  and other high flyers off the table? Suffice to say that the outlook for the balance of the year is darkening with each passing day, mostly due to the behavior of members of the Trump Administration. We’ll be updating subscribers to our Premium Service on changes in our portfolio next week.  Cracks in the world of private credit are getting so wide that some of the inferior players in the game are starting to fail. Remember when American International Group (AIG) pre-2008 thought they were a price maker, but they were actually the chump to a lot of Wall Street banks? Readers of The IRA recall that Goldman Sachs (GS) played a significant, and some say predatory, role in AIG's failure by selling the insurer toxic mortgage-backed securities and then using credit default swaps to bet on their failure. Now we see the cracks in the wall as Wall Street has stuffed trillions in market risk into the book value world of insurance. Connecticut's Insurance Commissioner is preparing PHL Variable Insurance Co . and its affiliated businesses for potential sale. But there may not be any bidders, meaning that other CT domiciled insurers may have to pass the hat to clean up the mess.  PHL was placed into rehabilitation as of May 20, by order of the Superior Court of the State of Connecticut, Judicial District of Hartford . PHL Variable Insurance Company is severely insolvent. In May 2024, the Connecticut Insurance Department and Superior Court found that the company was in a "hazardous financial condition" with a negative capitalization over $2 billion. Based on affidavits of actuaries submitted to the Superior Court by the rehabilitator, the ArentFox law firm reports , the request for rehabilitation of PHL is the result of (1) high face value universal life insurance policies issued by PHL Variable Insurance to insureds over 70 years old between 2004 and 2007 maturing, and (2) a substantial portion of the companies’ investment assets consisting of bonds and structured securities that are “below investment grade or are at the very lowest rung of investment grade.”  That is, junk bonds.  PHL Variable Insurance Company is reportedly owned by the Nassau Financial Group , which is backed by private asset manager Golden Gate Capital.  At the start of 2025, Nassau Financial Group reportedly raised $200 million in nonvoting equity from Golub Capital , which now holds the largest minority equity stake in Nassau. Private credit powerhouse Golub Capital joins previous investors Fortress Investment Group, Wilton Reassurance Company, and Stone Point Credit as investors in Nassau.  But is private credit really an attractive area for new investment? Why do major firms focused on retail investors push private credit strategies? Fees. Most mutual fund firms cannot survive in their present form. Pushing risky credit strategies onto retail investors is a way for investment firms to immediately and dramatically boost returns. This includes management fees equal to 1-2% on committed assets vs a few basis points for operating a mutual fund.  The asset-weighted average fee for all mutual funds dropped from 0.44% in 2023 to 0.42% in 2024. Apollo Global (APO)  CEO Marc Rowan spoke to CNBC  earlier this week  “about the foundations of our financial system, the shift we’re seeing towards integrating both public and private assets in investment portfolios, and the evolving role of private credit as a fixed income replacement.”  To listen to Rowan, investors should sell all of their public equity and debt securities and put their assets into private credit. Right? There’s no concentration risk in private credit, right Marc?  Even as private credit players like PHL Variable Insurance head for the rendering hut, the wheels are starting to come off of the cart more generally in private credit and the related disaster known as private equity. The number of PE portfolio companies that are using “payment in kind” or PIK to avoid default on private debt is growing, but US regulators at the SEC and the Fed are strangely silent. And even a Fed rate cut may not save many private equity issuers from collapse.  The usage of payment-in-kind (PIK) debt in private credit, which is a component of many PE portfolios, has reached a new high, with one report indicating 11.4% of all private debt investments had some form of PIK in Q2 2025. PIK is when an insolvent borrower pays investors by giving them more debt or equity instead of cash. As we described in The IRA Bank Book for Q3 2025 , loan forbearance and negotiation with creditors have replaced foreclosure and bankruptcy, but this behavior has a finite endpoint. How much of total bank exposure to private credit is receiving some form of forbearance? We'd guess at least one quarter of all deals. We commented on the change in bank rules regarding forbearance and loan modification in a report by Joshua Franklin the Financial Times .   Meanwhile in Washington, members of the Federal Reserve Board are worried about the upcoming meeting of the FOMC and the continuing attacks by the Trump Administration, which wants to put Steve Miran on the Fed before the September vote to ensure a reduction in interest rates.  Wall Street folks may believe that President Donald Trump is calling for Fed rate cuts because he’s concerned about the growing pile of defaulted assets accumulating in the world of private equity and credit, but that would be a lie. In fact, Team Trump is merely trying to cement a win for Republican Party in next year’s mid-term elections. They are largely indifferent to the growing signs of distress in private equity and credit. But the big threat to the markets may be a repeat of the Fed’s mismanagement of the short-term funds market a la December 2018, when the very new Chairman Jerome Powell almost crashed a couple of money market funds and mortgage REITs. He quickly executed a perfect pirouette , dropped the target for fed funds three times and began to buy securities and sell TBAs – this a year before COVID began . Now banking market insiders are saying that the Fed’s model for the minimum level of bank reserves may be wrong.  “We could see some temporary pressure around the tax date and quarter-end in September,” Dallas Fed President Lori Logan said last week in remarks prepared for a panel at a conference hosted by Mexico’s central bank. She expressed confidence that the standing repo facility (SRF) and discount window would suffice to deal with any funds shortage in the money markets. Meanwhile, Bill Nelson , Chief Economist at Bank Policy Institute, penned an alarming comment about the Fed’s management of bank reserves.  Nelson is a very careful and knowledgeable economist who understands the cash reality of the Fed’s relationship with the US Treasury. Given the size of the Treasury’s General Account (TGA) at the Fed, and the significant fact that this $800 billion cash pile is half funded with debt, Nelson’s warning is notable.  Nelson: “The minutes to the July FOMC meeting indicate that the Committee may be intending to take an odd and unnecessarily reckless approach to balance sheet management in the coming months.  The minutes note that because the ON RRP facility will soon decline to zero, further reductions in Federal Reserve assets will result in sustained declines in reserve balances for the first time since QT began in June 2022.  The minutes also note that there will be days – “quarter-ends, tax dates, and days associated with large settlements of Treasury securities” – when reserve balance will temporarily drop sharply.  The desk manager indicated that on such days, “utilization of the SRF [standing repo facility] would likely support the smooth functioning of money markets…”  Similarly, a couple of FOMC participants “…highlighted the role of the SRF in monetary policy implementation…” We see two basic problems with the Fed’s management of bank reserves, deposits with banks that it creates via open market operations. When the bond purchased by the Fed is redeemed, the deposit created disappears because the Treasury is in deficit.  But the Fed really has no visibility into the disposition of reserves and thus the availability of liquidity to the broad market. Both Nelson and George Selgin of CATO Institute have made this point about the uneven (and unknowable) distribution and availability of market liquidity.   The second and more significant problem is that many banks and dealers are still not prepared to actually use the SRF or discount window. We agree with Nelson that placing emphasis on the SRF or the discount window as solutions to a sudden scarcity of reserves is reckless and quite strange. It's almost as though Fed officials want to see the money markets to seize up a la December 2018.  Again, Nelson comments on the odd choice made by the Fed staff: “The Fed’s official plan is to continue QT until reserve balances decline to what staff judge is the minimum amount needed to implement monetary policy using the Committee’s current approach – a “floor system.” This is an odd plan because the Fed has two options that are superior to relying on the SRF that are not mentioned.  Most obviously, the Fed could use temporary operations to offset the sharp declines in reserve balances.  The days when the declines occur are known in advance.  The Fed could either conduct a large repo operation on those days, or layer in term repos in advance of those days, or both.  As the TGA returns to its normal level, the temporary operations could be wound down. By doing so, reserve balances can continue to decline gradually rather than abruptly.” To us, the Fed’s management of market liquidity is the single most glaring operational deficiency at the central bank. Instead of following the lead of other central banks that rely upon market indicators to judge liquidity, the New Dealers at the Fed are still trying to play god with private markets, trying to manage the ebb and flow of the money markets and the crucial relationship with the Treasury’s cash raising and remittance operations. This effort is bound to fail, perhaps with disastrous results. If the Powell FOMC crashes the short-term markets, again, because the Board staff mismanages the required level of liquidity, Powell will need to resign same day but the real loser will be the Trump Administration.  Neither the public nor members of Congress will understand who caused the latest market upset, but they will be happy to blame Donald Trump and members of his team. Further Reading: How Fannie Mae, Freddie Mac release could change mortgage costs The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is pr ovided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

September 1, 2025 | Premium Service | Whalen Global Advisors has published the latest edition of The IRA Bank Book for Q3 2025 [ISBN 978-0-692-09756-4] . Entitled "Growing Market Risk Threatens US Banks," the 30-page report details how Wall Street investment firms have shifted an enormous amount of market risk to banks and insurers over the past several years.

August 27, 2025  | Premium Service  | A while back we wrote about the possibility of legislation banning trigger leads, lists of consumers who have recently applied for credit. Trigger leads are generated by credit bureaus like Experian plc (EXPGF)  and sold to other lenders and companies to market new products and services by using confidential customer data.

August 25, 2025  | It is only half way through the first year of the Trump presidency, but the special role of the dollar is ending ahead of schedule. The Treasury’s already ample borrowing is about to increase dramatically, giving foreign investors many more reasons to invest in assets other than dollars. Yet US equity and debt markets continue to absorb all of the available cash in the global markets even as the Fed continues to slowly shrink its balance sheet.       US equity valuations are at record highs and bank lending to nonbank funds and entities is also surging. We took a lot of alpha off the table in front of the Jackson Hole media fest last week, in part because we still don’t think there is a majority for interest rate cuts on the FOMC. Fed Chairman Jerome Powell could vote with the Republicans governors and still lose the vote. And Powell will laugh in the event. Margin credit in the US reached a new peak last week, FINRA reports. As of the second quarter of 2025, total margin loans in the United States reached a record high of $1.008 trillion vs just $850 billion in April. Our question: Why isn't margin debt even higher given the scale of the bubble? Source: FINRA Americans are trading crypto tokens and talking to themselves via the electronic parrot known as “artificial intelligence” or AI. Indeed, the entire US financial complex has been converted into a large game and AI sits atop the great pile. Since games are not securities, hucksters can say whatever they like about future performance of tokens. As the US seemingly heads to a climatic market blow off, the rest of the world is migrating back to gold as the chief reserve asset. At the core of the economic debate in Jackson Hole, hopefully, is why the dollar remains so strong given the libertine behavior of the national Congress and the equally erratic behavior of the US Treasury and central bank. White House Council of Economic Advisers Chair Stephen Miran argues correctly that the dollar's status as the international reserve currency makes it overvalued, forcing the U.S. to run current-account deficits and hindering U.S. manufacturing.  Miran's proposed solution to the strong dollar involves "outside-the-box" policy options, such as the "Mar-a-Lago Accord," aimed at lowering the dollar's value to make the dollar more competitive by selling US gold stocks. Miran’s point about the inflated dollar is very valid, but demand for dollars is not just about trade.  And no, we sell paper to devalue the currency, not gold Stephen. In addition to current account deficits, the US also now tolerates higher inflation. Why? The combination of huge public deficits and equally large foreign investment flows. It is the financial use of the currency drives the dollar’s chronic overvaluation. Given the federal debt, Miran and his master Donald Trump should be glad of the strong dollar. The way that we ought to deal with this real problem of a bloated dollar, as we discuss with author Jim Rickards in Inflated: Money, Debt and the American Dream , involves letting go of the reserve status of the dollar. The US should aggressively buy gold and sell fiat dollars.  Turn the logic of former Texas Governor and Treasury Secretary John Connally to a new purpose. In 1971, for the younger members of the audience, Treasury Secretary Connally famously remarked how the US dollar was "our currency, but your problem," referring to how the US dollar was managed primarily for the US' interests despite it being the currency primarily used in global trade and finance. Not much has changed in 50 years except the size of the dollar market. Gold won the battle for reserve asset preeminence in 1969, when the Treasury withdrew from the London Gold Pool. Final surrender came in 1971, when President Richard Nixon closed the gold window to other countries. After Nixon’s capitulation, Paul Volcker and other US officials tried to shift the world's monetary system away from gold altogether, but ultimately failed with the reemergence of gold in Asia and Russia. Jim Rickards notes that Americans “no longer know what money is” and have replaced “money with moneyness.” He then describes why Americans may lose the privilege of issuing the global reserve currency sooner than many think possible: “Money’s value springs from trust, and trust itself depends on some institution—a central bank, a rule of law, a gold hoard, an AI algorithm—to sustain it. When institutions break down, and trust is lost, the value of money is lost as well, only to await the rise of new institutions and new forms of money so the cycle begins again.” It needs to be said that FDR did not need to seize gold in 1933 for economic reasons, it was all about the socialist politics of the time. From 1913 onward, the Fed's ability to grow liquidity was never constrained by gold. President Trump’s embrace of crypto sponsors and deficit spending is more of the same political self interest at work a century later. In the wonderfully sarcastic book, “The New Dealers,” published anonymously in 1934 by Simon & Schuster, the “Unofficial Observer” described the FDR devaluation and repudiation of gold: “On the one hand, you have the good old traditional way of doing business, which required the entire population of the country to ‘walk home’ at twenty-year intervals in the name of God and the Gold Standard. On the other hand, you have the new technique of the financial sheik who claims that you can use buttons instead of money. The old school claims that buttons belong in button-holes, the new school asks what is the Gold Standard between friends. The times are on the side of the new school, for the financing of a revolution—even an unconscious one—takes a lot of money, and a lot of buttons.” The progression from the antediluvian word of gold as money, to various forms of fiat paper tokens issued by nation states and protected by legal tender laws, to the brave new work of crypto tokens and “stable coins” pegged to fiat currencies, illustrates the rise of financial repression in the modern age.  And the value of gold remains a function of the yield available on paper. The chart below shows the portion of bank gross interest revenue that goes to equity rather than deposits and other debt. During COVID, the index was over 90%. Source: FDIC/WGA LLC Some Americans believe that artificial intelligence creates actual understanding instead of an electronic parrot. Others believe that crypto tokens represent value instead of a ponzi scheme. And you cannot tell fully entitled Americans that they are mistaken. Meanwhile, today the Trump Administration is hurtling forward with a fiscal agenda that will see the public debt grow by $3-4 trillion in calendar 2025.  Under President Donald Trump, Americans face a return to the financial repression seen during the zero interest rates of 2019-2021 and hyperinflation caused by uncontrolled federal spending. Even as Americans dive down the crypto rabbit hole, around the world gold is being increasingly substituted for dollars as a reserve asset.  As more and more nations around the world sell dollars and buy gold, the American confusion about the nature of money and many other things will come more sharply into focus.   Top Posts Silver Surges? Waller Wants Lower Reserves & Tighter Policy https://www.theinstitutionalriskanalyst.com/post/theira734 Should the Federal Reserve Pay Interest on Bank Reserves? https://www.theinstitutionalriskanalyst.com/post/theira735 The Cost to Housing of Donald Trump https://www.theinstitutionalriskanalyst.com/post/theira737   The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

August 20, 2025  | Premium Service  | What New York area banks could take big losses or even fail if the Ugandan born Marxist Zohran Mamdani is elected Mayor of New York City? This telegenic cartoon character is riding a wave of public angst over, you guessed it, inflation, and he offers consumers nothing but empty hopes. Zohran wants to freeze the rent on all NYC recent stabilized apartments , an idiotic but popular idea that may sweep him into office.

June 5, 2025  | Bridgewater founder Ray Dalio  has been warning us about debt and deficits for some time, and on one level he is entirely right. In fact, CNBC has created a whole theme park of Dalio market wisdom  that makes for a nice reference resource for historians. For example, Dalio said at an event for the Paley Media Council in New York: “I think we should be afraid of the bond market. It’s like ... I’m a doctor, and I’m looking at the patient, and I’ve said, you’re having this accumulation, and I can tell you that this is very, very serious, and I can’t tell you the exact time. I would say that if we’re really looking over the next three years, to give or take a year or two, that we’re in that type of a critical, critical situation.” American leaders like Dalio correctly assess the fiscal mess in Washington, yet somehow we all seem incapable of looking at the situation globally, from the perspective of Europe, Japan or China. For 75 years since WW II, the other nations of the world have benefitted from American excess – so much so that they have no immediate incentive to change anything. When President Trump uses the threat of tariffs to start a long overdue conversation about the role of the US in the global economy, he is asking the right question. As Dalio and other market mavens warn about impending catastrophe in the bond market, we are unimpressed because we know that markets underestimate just how bad things can get. Even as the US heads for fiscal insolvency and hyperinflation, the latter comes via the Fed’s quantitative easing (QE) BTW, the rest of the world will continue to use dollars as a means of exchange and also for financing. Why not? After all, as we note in our new book " Inflated: Money, Debt and the American Dream ," the global dollar is a free good created in the aftermath of war. Naturally, the fee-driven inhabitants of the financial ghetto known as Wall Street have no incentive to cry foul. If major investment funds sold stocks to protest the lack of deficit reduction in Trump’s big beautiful bill, the original document would be in the trash the next day and House and Senate conservatives would be driving the bus. Instead, Wall Street professionals pretend that things can continue pretty much as normal despite the very specific warnings of billionaire sages like Dalio.  If the going gets tough, the Fed will just drop interest rates to 2020 levels, right? But hyperinflation, not fiscal collapse, is the real danger. How is our collective delusion possible? First and foremost, the narrative used to describe the US economy, Fed policy and factors like inflation and employment, is entirely domestic in focus. We almost completely ignore the offshore market for dollars and dollar financing. Yet no matter what ridiculous policies come spinning out of Washington, the 10-year Treasury note and longer dated issues somehow seem to grind back down in yield. Even with the slow deterioration in the functioning of the Treasury market, somebody seems to be buying dollar paper. Could this be because much of the world is already dollarized? The simple answer is that demand for dollars and dollar-denominated, “risk free” assets like Treasury debt and Ginnie Mae passthroughs, remains brisk. Notice that the debt of Fannie Mae and Freddie Mac are no longer considered risk free assets by global central banks. More, the need for risk free collateral in dollar financings and currency swaps is vast and serves to boost demand. Nobody on the FOMC ever talks publicly about the global market for dollars because the Federal Reserve Act is silent on external factors. It's as though the global role of the dollar as a reserve currency created 75 years ago by Bretton Woods is somehow not relevant to US monetary policy.  The dollar is on one side of 80% of all currency transactions. Also, the strong economic growth coming from the emerging markets means that demand for dollars and dollar collateral is likely to grow.  Or to put it another way, none of the other global currencies can begin to absorb the demand for dollars – at least without stoking huge internal inflation. Just as there was not sufficient physical currency to meet the demands of 19th Century American, today the needs of the global economy may outstrip even the rapid currency inflation being engineered by the Federal Reserve Board via QE to keep pace with the growth in federal debt. When Ray Dalio says to be afraid of the bond market, he is asking a question that belongs in the mid-1970s, when the dollar still competed with other currencies and US interest rates were actually affected by interest rates in other nations. But today, with many of the other industrial nations led by Japan, China and the EU literally drowning in public debt, the US is still the leader of the hideous fiat currency parade. As all global central banks march toward a day of reckoning and hyperinflation, the fiat paper dollar remains the global standard -- for now. Notice the huge increase in the total assets of US banks since 2020 vs the total Fed SOMA portfolio , as shown in the chart from FRED below. “The rise in longer-term US and developed-market bond yields risks becoming entrenched as fiscal largesse becomes a feature of economies, rather than a temporary bug,” writes Simon White of Bloomberg . “It’s easy to forget it’s not just the US — in its third year of running deficits of more than $1.5 trillion — that has abandoned fiscal restraint. Also across Europe and Japan, the list of what electorates expect from their governments is expanding, in the sovereign version of the Fed put: the fiscal put.” The good and bad news of sorts is that the US bond market will continue to function, even though we have annihilated most of the primary dealers of Treasury debt since 2008 and especially since 2020. US banks will be forced to purchase more ST Treasury debt, one reason that Treasury Secretary Scott Bessent will soon drop government debt from The Supplementary Leverage Ratio (SLR) . Source: FDIC If the Trump Administration prevails and wins trillions of dollars more in unfunded tax cuts to support Republican hopes in the midterm elections next year, then the next step for the Federal Open Market Committee will be to restart QE to ensure that the Fed’s balance sheet keeps pace with the burgeoning federal debt. But this time, rather than falling interest rates, QE may resume in the context of rising wages and prices, and higher short-term interest rates, as the Fed makes a last futile effort to control inflation. Get used to it.   We'll be describing the forward risks facing US investors in a future Premium Service issue of The Institutional Risk Analyst. The Institutional Risk Analyst (ISSN 2692-1812) is published by Whalen Global Advisors LLC and is provided for general informational purposes only and is not intended for trading purposes or financial advice. By making use of The Institutional Risk Analyst web site and content, the recipient thereof acknowledges and agrees to our copyright and the matters set forth below in this disclaimer. Whalen Global Advisors LLC makes no representation or warranty (express or implied) regarding the adequacy, accuracy or completeness of any information in The Institutional Risk Analyst. Information contained herein is obtained from public and private sources deemed reliable. Any analysis or statements contained in The Institutional Risk Analyst are preliminary and are not intended to be complete, and such information is qualified in its entirety. Any opinions or estimates contained in The Institutional Risk Analyst represent the judgment of Whalen Global Advisors LLC at this time, and is subject to change without notice. The Institutional Risk Analyst is not an offer to sell, or a solicitation of an offer to buy, any securities or instruments named or described herein. The Institutional Risk Analyst is not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. Whalen Global Advisors LLC is not acting as fiduciary or advisor with respect to the information contained herein. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the subjects addressed in The Institutional Risk Analyst. Interested parties are advised to contact Whalen Global Advisors LLC for more information.

August 18, 2025  | Premium Service  | As the financial markets speculate about whether the Federal Open Market Committee cuts the target for overnight money rates in September, we ponder whether the global financial markets are going to rise on a sea of rising liquidity regardless of what the Fed does or does not do next month. In our letter to the Financial Times  over the weekend , we warn that the next risk shock to global markets may come from another surprise a la FTX in the market for crypto tokens. H/T to Brendan Greeley .