The too big to fail banks have a larger share of the U.S. banking industry
than they have ever had before. So if having banks that were too big to
fail was a "problem" back in 2008, what is it today? As you will read about
below, the total number of banks in the United States has fallen to a brand
new all-time record low and that means that the health of the too big to
fail banks is now more critical to our economy than ever. In 1985, there
were
more than 18,000
banks in the United States. Today, there are only
6,891 left,
and that number continues to drop every single year. That means that more
than 10,000 U.S. banks have gone out of existence since 1985. Meanwhile,
the too big to fail banks just keep on getting even bigger. In fact, the
six largest banks in the United States (JPMorgan Chase, Bank of America,
Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley)
have collectively gotten 37 percent
larger over the past five years. If even one of those banks
collapses, it would be absolutely crippling to the U.S. economy. If several
of them were to collapse at the same time, it could potentially plunge us
into an economic depression unlike anything that this nation has ever seen
before.
Incredibly, there were actually more banks in existence back during the days
of the Great Depression than there is today. According to
the Wall Street
Journal, the federal government has been keeping track of the
number of banks since 1934 and this year is the very first time that the
number has fallen below 7,000...
The number of federally insured institutions nationwide shrank to 6,891 in
the third quarter after this summer falling below 7,000 for the first time
since federal regulators began keeping track in 1934, according to the
Federal Deposit Insurance Corp.
And the number of active bank branches all across America is falling too.
In fact, according to the FDIC the total number of bank branches in the
United States fell by
3.2 percent
between the end of 2009 and June 30th of this year.
Unfortunately, the closing of bank branches appears to be accelerating. The
number of bank branches in the U.S. declined by
390 during the third quarter of 2013 alone, and it is being
projected that the number of bank branches in the U.S. could fall
by as much as 40
percent over the next decade.
Can you guess where most of the bank branches are being closed?
If you guessed "poor neighborhoods" you would be correct.
According to
Bloomberg,
an astounding 93 percent of all bank branch closings since late 2008 have
been in neighborhoods where incomes are below the national median household
income...
Banks have shut 1,826 branches since late 2008, and 93 percent of closings
were in postal codes where the household income is below the national
median, according to census and federal banking data compiled by Bloomberg.
It turns out that opening up checking accounts and running ATM machines for
poor people just isn't that profitable. The executives at these big banks
are very open about the fact that they "love
affluent customers", and there is never a shortage of bank
branches in wealthy neighborhoods. But in many poor neighborhoods it
is a very different story...
About 10 million U.S. households lack bank accounts, according to a study
released in September by the Federal Deposit Insurance Corp. An additional
24 million are “underbanked,” using check-cashing services and other
storefront businesses for financial transactions. The Bronx in New York City
is the nation’s second most underbanked large county—behind Hidalgo County
in Texas—with 48 percent of households either not having an account or
relying on alternative financial providers, according to a report by the
Corporation for Enterprise Development, an advocacy organization for lower-income
Americans.
And if you are waiting for a whole bunch of new banks to start up to serve
these poor neighborhoods, you can just forget about it. Because of a whole
host of new rules and regulations that have been put on the backs of small
banks over the past several years, it has become nearly impossible to start
up a new bank in the United States. In fact, only
one new bank has been started in the United States in the
last three years.
So the number of banks is going to continue to decline. 1,400 smaller banks
have quietly disappeared from the U.S. banking industry over the past five
years alone. We are witnessing a consolidation of the banking industry in
America that is absolutely unprecedented.
Just consider the following statistics. These numbers come from a recent
CNN article...
-The assets of the six largest banks in the United States have grown
by 37 percent
over the past five years.
-The U.S. banking system has 14.4 trillion dollars in total assets. The six
largest banks now account for
67 percent
of those assets and all of the other banks account for only
33 percent
of those assets.
-Approximately
1,400 smaller banks
have disappeared over the past five years.
-JPMorgan Chase is roughly the size of the entire British economy.
-The four largest banks have
more than a million
employees combined.
-The five largest banks account for
42 percent
of all loans in the United States.
-Bank of America accounts for about
a third
of all business loans all by itself.
-Wells Fargo accounts for about
one quarter
of all mortgage loans all by itself.
-About
12 percent
of all cash in the United States is held in the vaults of JPMorgan Chase.
As you can see, without those banks
we do not have a financial system.
Our entire economy is based on debt, and if those banks were to disappear
the flow of credit would dry up almost completely. Without those banks, we
would rapidly enter an economic depression unlike anything that the United
States has seen before.
It is kind of like a patient that has such an advanced case of cancer that
if you try to kill the cancer you will inevitably also kill the patient.
That is essentially what our relationship with these big banks is like at
this point.
Unfortunately, since the last financial crisis the too big to fail banks
have become even more reckless. Right now, four of the too big to fail
banks each have total exposure to derivatives that is well in excess of 40
TRILLION dollars.
Keep in mind that U.S. GDP for the entire year of 2012 was just 15.7
trillion dollars and the U.S. national debt is just 17 trillion dollars.
So when you are talking about four banks that each have more than 40
trillion dollars of exposure to derivatives you are talking about an amount
of money that is almost incomprehensible.
Posted below are the figures for the four banks that I am talking about. I
have written about this in the past, but in this article I have included the
very latest
updated numbers
from the U.S. government. I think that you will agree that these numbers
are absolutely staggering…
JPMorgan Chase
Total Assets: $1,947,794,000,000 (nearly 1.95 trillion dollars)
Total Exposure To Derivatives: $71,289,673,000,000 (more than 71 trillion
dollars)
Citibank
Total Assets: $1,319,359,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $60,398,289,000,000 (more than 60 trillion
dollars)
Bank Of America
Total Assets: $1,429,737,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $42,670,269,000,000 (more than 42 trillion
dollars)
Goldman Sachs
Total Assets: $113,064,000,000 (just a shade over 113 billion dollars – yes,
you read that correctly)
Total Exposure To Derivatives: $43,135,021,000,000 (more than 43 trillion
dollars)
Please don't just gloss over those huge numbers.
Let them sink in for a moment.
Goldman Sachs has total assets worth approximately 113 billion dollars
(billion with a little "b"), but they have more than 43 TRILLON dollars of
total exposure to derivatives.
That means that the total exposure that Goldman Sachs has to derivatives
contracts is more than 381
times greater than their total assets.
Most Americans do not understand that Wall Street has been transformed into
the largest casino in the history of the world. The big banks are being
incredibly reckless with our money, and if they fail it will bring down the
entire economy.
The biggest chunk of these derivatives contracts that Wall Street banks are
gambling on is made up of interest rate derivatives. According to the Bank
for International Settlements, the global financial system has a total of
441 TRILLION dollars
worth of exposure to interest rate derivatives.
When that Ponzi scheme finally comes crumbling down, there won't be enough
money on the entire planet to fix it.
We had our warning back in 2008.
The too big to fail banks were in the headlines every single day and our
politicians promised to fix the problem.
But instead of fixing it, the too big to fail banks are now 37 percent
larger and our economy is more dependent on them than ever before.
And in their endless greed for even larger paychecks, they have become
insanely reckless with all of our money.
Mark my words - there is
going to be a derivatives crisis.
When it happens, we are going to see some of these too big to fail banks
actually fail.
At that point, there will be absolutely no hope for the U.S. economy.
anks to become the core of our economic system, and now we are all going to
pay the price.
