by Pam Martens and Russ Martens at Wall Street on Parade
Yesterday, the House Financial Services’ Subcommittee on Oversight and Investigations held a critically important hearing on the crypto craze that has engulfed U.S. financial markets. The hearing was titled: “America on ‘FIRE’: Will the Crypto Frenzy Lead to Financial Independence and Early Retirement or Financial Ruin?”
Before the witnesses could testify, the Republican Ranking Member of the Subcommittee, Congressman Tom Emmer of Minnesota, delivered Alice in Wonderland opening remarks that downplayed the legitimate concerns of the hearing and effectively characterized crypto as the best innovation since sliced bread. (Emmer is a former registered lobbyist in Minnesota and his Congressional campaign coffers are stuffed with money from the financial services industry.)
It didn’t take long, however, for that farcical assessment to collapse under the weight of testimony from a Wall Street veteran, Alexis Goldstein, who is the current Director of Financial Policy for the nonprofit group, the Open Markets Institute.
Goldstein was asked by Congresswoman Maxine Waters about a survey released earlier this year by the accounting firm, PwC, which indicated that 1 in 7 hedge funds have 10 to 20 percent of their total assets under management invested in crypto. (Equally frightening, the same survey found that 86 percent of the hedge funds currently investing in crypto intend to deploy more capital by the end of this year.)
Goldstein responded that the public has already witnessed this year the collapse of the family office hedge fund, Archegos, which demonstrated that when banks have prime broker relationships with hedge funds it can create losses at the banks, which hold federally-insured (taxpayer-backstopped) deposits. (Large global banks lost more than $10.4 billion when Archegos defaulted on its margin loans to the banks in March.) Goldstein explained:…
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