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 banksin 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 employeescombined.
-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.
We willingly allowed the too big to fail banks
to become the core of our economic system, and now we are all going
to pay the price.
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