Tag Archives: Big Banks

10 Banks Own 77 Percent Of All U.S. Banking Assets: Too Big To Fail?

Too Big To Fail?: 10 Banks Own 77 Percent Of All U.S. Banking Assets

Courtesy of The Economic Collapse Blog

Back during the financial crisis of 2008, the American people were told that the largest banks in the United States were “too big to fail” and that was why it was necessary for the federal government to step in and bail them out. The idea was that if several of our biggest banks collapsed at the same time the financial system would not be strong enough to keep things going and economic activity all across America would simply come to a standstill. Congress was told that if the “too big to fail” banks did not receive bailouts that there would be chaos in the streets and this country would plunge into another Great Depression. Since that time, however, essentially no efforts have been made to decentralize the U.S. banking system. Instead, the “too big to fail” banks just keep getting larger and larger and larger. Back in 2002, the top 10 banks controlled 55 percent of all U.S. banking assets. Today, the top 10 banks control 77 percent of all U.S. banking assets. Unfortunately, these giant banks are also colossal mountains of risk, debt and leverage. They are incredibly unstable and they could start coming apart again at any time. None of the major problems that caused the crash of 2008 have been fixed. In fact, the U.S. banking system is more centralized and more vulnerable today than it ever has been before.

It really is difficult for ordinary Americans to get a handle on just how large these financial institutions are. For example, the “big six” U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America’s gross national product.

These huge banks are giant financial vacuum cleaners. Over the past couple of decades we have witnessed a financial consolidation in this country that is absolutely unprecedented.

This trend accelerated during the recent financial crisis. While the big boys were receiving massive bailouts, the hundreds of small banks that were failing were either allowed to collapse or they were told that they should find a big bank that was willing to buy them.

As a group, Citigroup, JPMorgan Chase, Bank of America and Wells Fargo held approximately 22 percent of all banking deposits in FDIC-insured institutions back in 2000.

By the middle of 2009 that figure was up to 39 percent.

That is not just a trend – that is a landslide.

Sadly, smaller banks continue to fail in large numbers and the big banks just keep growing and getting more power.

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Today, there are more than 1,000 U.S. banks that are on the “unofficial list” of problem banking institutions.

In the absence of fundamental changes, the consolidation of the banking industry is going to continue.

Meanwhile, the “too big to fail” banks are flush with cash and they are getting serious about expanding. The Federal Reserve has been extremely good to the big boys and they are eager to grow.

For example, Citigroup is becoming extremely aggressive about expanding….

Citigroup has been hiring dozens of investment bankers, dialing up advertising and drawing up plans to add several hundred branches worldwide, including more than 200 in major cities across the United States.

Hopefully the big banks will start lending again. The whole idea behind the bailouts and all of the “quantitative easing” that the Federal Reserve did was to get money into the hands of the big banks so that they would lend it out to ordinary Americans and get the economy rolling again.

Well, a funny thing happened. The big banks just sat on a lot of that money.

In particular, what they did was they deposited much of it at the Fed and drew interest on it.

Since 2008, excess reserves parked at the Fed have grown by nearly 1.7 trillion dollars. Just check out the chart posted below….

The American people were promised that TARP and all of the other bailouts would enable the big banks to lend out lots of money which would help get the economy going for ordinary Americans again.

Well, it turns out that in 2009 (the first full year after Congress passed the bailout legislation) U.S. banks posted their sharpest decline in lending since 1942.

Lending has never fully recovered since the crash of 2008. The big financial institutions like Goldman Sachs, Morgan Stanley and JPMorgan Chase have been able to get all the cash that they need, but they have not passed that generosity along to ordinary Americans.

In fact, the biggest U.S. banks have actually reduced small business lending by about 50 percent since the crash of 2008.

That doesn’t sound like what we were promised.

These “too big to fail” banks have been able to borrow gigantic amounts of money from the Fed for next to nothing and yet they still refuse to let credit flow to local communities. Instead, the big banks have found other purposes for all of the super cheap money that they have been getting from the Fed as Ellen Brown recently explained….

It can be very profitable indeed for the big Wall Street banks, but the purpose of the near-zero interest rates was supposed to be to get banks to lend again. Instead, they are, indeed, paying “outrageous bonuses to their top executives;” using the money to engage in the same sort of unregulated speculation that nearly brought down the economy in 2008; buying up smaller banks; or investing this virtually interest-free money in risk-free government bonds, on which taxpayers are paying 2.5 percent interest (more for longer-term securities).

What makes things even worse is that these big banks often pay next to nothing in taxes.

For example, between 2008 and 2010, Wells Fargo made a total profit of 49.37 billion dollars.

Over that same time period, their tax bill was negative 681 million dollars.

Do you understand what that means? Over that 3 year time period, Wells Fargo actually got 681 million dollars back from the U.S. government.

Isn’t that just peachy?

Meanwhile, the big financial giants have not learned their lessons and they continue to do business pretty much as they did it prior to 2008.

The big banks continue to roll up massive amounts of risk, debt and leverage.

Today, Wall Street has become one giant financial casino. More money is made on Wall Street by making side bets (commonly referred to as “derivatives”) than on the investments themselves.

If the bets pay off for the big financial institutions, mind blowing profits can be made. But if the bets go against the big financial institutions (as we saw in 2008), firms can collapse almost overnight.

In fact, it was derivatives that almost brought down AIG. The biggest insurance company in the world almost folded in 2008 because of a whole bunch of really bad bets.

The danger from derivatives is so great that Warren Buffet once called them “financial weapons of mass destruction”. It has been estimated that the notional value of the worldwide derivatives market is somewhere in the neighborhood of a quadrillion dollars.

The largest banks have tens of trillions of dollars of exposure to derivatives. When the next great financial collapse happens, derivatives will almost certainly be at the center of it once again. These side bets do not create anything real for the economy – they just make and lose huge amounts of money. We never know when the next great derivatives crisis will strike. Derivatives are essentially like a “sword of Damocles” that perpetually hangs over the U.S. financial system.

When I start talking about derivatives I get a lot of people in the financial community mad at me. On Wall Street today you can bet on just about anything you can imagine. Almost everyone in the financial world has gotten so used to making wild bets that they couldn’t even imagine a world without them. If anyone even tried to put significant limits on futures, options and swaps it would cause Wall Street to throw a hissy fit.

But someday the dominoes are going to start to fall and the house of cards is going to come crashing down. It is an open secret that our financial system is fundamentally unsound. Even a lot of people working on Wall Street will admit that. It is just that people are so busy making such big piles of money that nobody wants the party to stop.

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It is only a matter of time until some of these big banks get into a huge amount of trouble again. When that happens, we might really find out whether they are “too big to fail” or whether we could get along just fine without them.

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40 Facts That Prove The Working Class Is Being Systematically Wiped Out

40 Facts That Prove The Working Class Is Being Systematically Wiped Out

Courtesy The Economic Collapse Blog

Without an abundance of good jobs, the middle class in the United States is going to shrivel up and die. Right now, rampant unemployment is absolutely killing communities all over America. Hopelessness and poverty are exploding and many are now wondering if we are actually witnessing the slow death of the middle class. There simply are not nearly enough “good jobs” to go around anymore, and even many in the mainstream media are referring to this as a “long-term structural problem” with the economy. The only thing that most working class Americans have to offer in the marketplace is their labor. If nobody will hire them they do not have any other ways to provide for their families. Well, there is a problem. Today wealth has become incredibly centralized. The big corporations and the big banks dominate everything. Thanks to incredible advances in technology and thanks to the globalization of our economic system, the people with all the money don’t have to hire as many ordinary Americans anymore. They can hire all the labor they want on the other side of the globe for a fraction of the cost. So the rich don’t really have that much use for the working class in America anymore. The only thing of value that the working class had to offer has now been tremendously devalued. The wealthy don’t have to pay a lot for physical labor anymore. Thousands of our factories and millions of our jobs have been shipped overseas and they aren’t coming back. The big corporations are thriving while tens of millions of ordinary Americans are deeply suffering. Almost all of the wealth being produced by our economy is going to a very centralized group of people at the very top of the food chain. The rich are getting richer and the working class is being systematically wiped out.

So the fact that we are facing rampant unemployment that never seems to go away should not be a surprise to anyone. Today, the “official” unemployment rate went up to 9.2 percent even though a whopping 272,000 Americans “dropped out of the labor force” in June. The government unemployment figure that includes “discouraged workers” went up from 15.8% to 16.2%. The mainstream media is proclaiming that this was “a horrific report” because most economists were expecting much better news.

Well, guess what?

Things are going to get a whole lot worse.

More job cuts are coming. One recently released report found that the number of job cuts being planned by U.S. employers increased by 11.6% in June.

It is also being projected that state and local governments across the U.S. will slash nearly half a million more jobs by the end of next year.

Needless to say, things don’t look good.

Most people that still have jobs are desperately trying to hold on to them.

Employers know that most workers are easily replaceable these days, so wages are not moving up even though the cost of living is.

We are right in the middle of the worst employment downturn since World War 2. Jay-Z recently summed up the situation this way….

“Numbers don’t lie. Unemployment is pretty high.”

Jay-Z certainly has a way with words, eh?

If something is not done about the rampant unemployment in this nation, the death of the middle class will accelerate.

Most Americans just assume that the United States will always have a large middle class, but there is no guarantee that is going to happen. In fact, there is a whole lot of evidence that the middle class in America is rapidly shrinking.

Take a few moments to read over the facts compiled below. Taken together, they provide compelling evidence that the working class is being systematically wiped out….

#1 Right now, the U.S. government says that 14.1 million Americans are unemployed.

#2 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million people to the population since then.

#3 The number of Americans that are “not in the labor force” is at an all-time high.

#4 The United States has never had an employment downturn this deep and this prolonged since World War 2 ended.

#5 There are officially 6.3 million Americans that have been unemployed for more than 6 months. That number has risen by more than 3.5 million in just the past two years.

#6 It now takes the average unemployed worker in America about 40 weeks to find a new job. Just check out this chart….

#7 There are now about 7.25 million fewer jobs in America than when the recession began back in 2007.

#8 Back in 2000, the employment to population ratio was over 64 percent. Today, it is sitting at just 58.2%.

#9 Only 66.8% of American men had a job last year. That was the lowest level that has ever been recorded in all of U.S. history.

#10 During this economic downturn, employee compensation in the United States has been the lowest that it has been relative to gross domestic product in over 50 years.

#11 The number of “low income jobs” in the U.S. has risen steadily over the past 30 years and they now account for 41 percent of all jobs in the United States.

#12 Half of all American workers now earn $505 or less per week.

#13 According to a report released in February from the National Employment Law Project, higher wage industries are accounting for 40 percent of the job losses in America but only 14 percent of the job growth. Lower wage industries are accounting for just 23 percent of the job losses but 49 percent of the job growth.

#14 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

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#15 Between December 2000 and December 2010, 38 percent of the manufacturing jobs in Ohio were lost, 42 percent of the manufacturing jobs in North Carolina were lost and 48 percent of the manufacturing jobs in Michigan were lost.

#16 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs.

#17 Do you remember when the United States was the dominant manufacturer of automobiles and trucks on the globe? Well, in 2010 the U.S. ran a trade deficit in automobiles, trucks and parts of $110 billion.

#18 In 2010, South Korea exported 12 times as many automobiles, trucks and parts to us as we exported to them.

#19 The United States now spends more than 4 dollars on goods and services from China for every one dollar that China spends on goods and services from the United States.

#20 Since China entered the WTO in 2001, the U.S. trade deficit with China has grown by an average of 18% per year.

#21 The U.S. trade deficit with China in 2010 was 27 times larger than it was back in 1990.

#22 The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.

#23 In 2002, the United States had a trade deficit in “advanced technology products” of $16 billion with the rest of the world. In 2010, that number skyrocketed to $82 billion.

#24 Manufacturing employment in the U.S. computer industry was actually lower in 2010 than it was in 1975.

#25 Since 2001, over 42,000 manufacturing facilities in the United States have been closed.

#26 There were more manufacturing jobs in the United States in 1950 than there are today.

#27 Since the year 2000, we have lost approximately 10% of our middle class jobs. In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs. Meanwhile, our population has gotten significantly larger.

#28 When you adjust wages for inflation, middle class workers in the United States make less money today than they did back in 1971.

#29 One recent survey found that 9 out of 10 U.S. workers do not expect their wages to keep up with soaring food prices and soaring gas prices over the next 12 months.

#30 Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.

#31 One out of every six elderly Americans now lives below the federal poverty line.

#32 According to one recent study, approximately 21 percent of all children in the United States were living below the poverty line in 2010.

#33 Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid.

#34 As 2007 began, there were 26 million Americans on food stamps. Today, there are more than 44 million Americans on food stamps, which is an all-time record.

#35 Today, one out of every four American children is on food stamps.

#36 59 percent of all Americans now receive money from the federal government in one form or another.

#37 The number of Americans that are going to food pantries and soup kitchens has increased by 46% since 2006.

#38 In the United States today, the richest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

#39 According to Moody’s Analytics, the wealthiest 5% of all households in the United States now account for approximately 37% of all consumer spending.

#40 The poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States.

The cold, hard reality of the matter is that the United States is experiencing a long-term economic decline.

Every single day, more American families fall out of the middle class and into poverty. There are millions of American families out there tonight that are just barely hanging on by their fingernails.

More Americans than ever are constantly borrowing more money just to stay afloat. Even as rampant unemployment plagues this nation and even as wages remain stagnant, middle class Americans are increasing their use of credit.

A CNBC article noted the increase in consumer borrowing that we have seen recently….

The Federal Reserve says consumer borrowing rose $5.1 billion following a revised gain of $5.7 billion in April. Borrowing in the category that covers credit cards increased, as did borrowing in the category for auto and student loans.

It is very hard to live “the American Dream” without going into huge amounts of debt these days.

But for an increasing number of Americans, “the American Dream” is just a distant memory.

Tonight, there are large numbers of people living in the tunnels under the city of Las Vegas. As the wealthy live the high life in the casinos and hotels above them, an increasing number of desperate “tunnel people” are attempting to carve out an existence in the 200 mile long labyrinth of tunnels that stretches beneath Vegas. It is a nightmarish environment, but it is all those people have left.

Don’t look down on them, because you never know who might be next.

If you lost your current job, how long would you be able to survive?

Unfortunately, as bad as things are now, the reality is that this is just the beginning.

You ain’t seen nothin’ yet.

Do what you can to make sure that you and your family are not totally wiped out by the next wave of the economic collapse.

SOURCE