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15 Years Ago, the Combined Assets of the 6 Biggest Banks Totaled 17% of GDP... By 2006, 55% ... Now, 63%

George Washington's picture




 

You know the big banks have gotten bigger.

As Rolfe Winkler noted last September:

For
the big have gotten even bigger since the start of the financial
crisis. At the end of 2007, the Big Four banks — Citigroup, JPMorgan
Chase, Bank of America and Wells Fargo — held 32 percent of all
deposits in FDIC-insured institutions. As of June 30th, it was 39
percent.

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But Simon Johnson gives an even broader perspective on how big the too big to fails have gotten:

Fifteen
years ago, the combined assets of our six biggest banks totaled 17
percent of our GDP. By 2006, that number was 55 percent. Right now, it
stands at 63 percent.

Johnson also points out that:

The
big four have half of the market for mortgages and two-thirds of the
market for credit cards. Five banks have over 95 percent of the market
for over-the-counter derivatives. Three U.S. banks have over 40 percent
of the global market for stock underwriting.

As I've previously noted, the government created the mega-giants (they are not the product of free market competition), and their very size destroys the real economy like a massive black hole destroys the matter around it.

And as Johnson and many others
have pointed out, the very size of the giant banks enables them to 
easily capture politicians ... about as easily as the
Great Attractor captures galaxies.

 

 

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Wed, 03/03/2010 - 00:53 | 251964 dark pools of soros
dark pools of soros's picture

is that whole pie a crumb from Goldman's dessert napkin?

Tue, 03/02/2010 - 23:45 | 251908 Anonymous
Anonymous's picture

The term TBTF is so passé.

How about: TSTS - Too Small To Save??

Tue, 03/02/2010 - 22:42 | 251838 JimS
JimS's picture

At the current rate-of-change, the top 6 banks will control 95% in 7 years, or less, and they are TBTF right now. Looks bleak folks. Looks like we should just let them go, and then we'll all be Hobos like "merehuman". Wonderful!

Tue, 03/02/2010 - 23:33 | 251821 Privatus
Privatus's picture

The only persistent monopolies or oligarchies are those created by the state. US money center banks are creatures of the state, which prohibits by law the creative destruction of the manifest inefficiencies of the banking cartel. TARP and its progeny are the primary expressions of this destructive conservation of ineffiency (and inequity).

Tue, 03/02/2010 - 20:45 | 251735 London Banker
London Banker's picture

More than 20 years ago a forensic accountant told me that the rate of asset growth at a bank was the surest indicator of its likely failure. 

Your documenting the rate of asset growth at the six largest banks in the US makes me think of his observation.  If it holds - and it has held for over four hundred years of banking history - then the failures ahead are going to be of massive global proportion.

Tue, 03/02/2010 - 18:47 | 251645 Hulk
Hulk's picture

Bob Brinker interviewed Larry McDonald, former Lehman Brothers Vice president, last weekend and it was a stunner
(Larry has a new book out , a "colossal failure of common sense"
reputed to be the next "Liar's poker")
Mcdonald stated that the TBTF's should be called "Too big to manage"
and are simply too big for any CEO to understand their balance sheet and that they should be reduced in size so as to not pose systemic risk. He stated that AIG and CITI are too big and place the system at risk
He also stated that Fuld had a board full of 70+ year old cronies
and he is appealing to congress for enacting term limits on Corporate boards.
He said that Lehman had 40,000 traders making money and ONLY 8 who lost money. No kidding, 8.
McDonald was fascinating to listen to, full of piss and vinegar,
and I intend to read the book when it arrives tomorrow.
The interview can be listened to on Brinker's site, but the audio section of the site is for pay only
On an unrelated, but important subject,Brinker also discussed the fact that when Paulsen took the treasury job, he had to divest himself of all Goldman Stock. All 500 million worth.
The twist is: he didn't have to pay taxes on that money, because the government ordered its divestment, they also allow that it be tax free .UNBELIEVABLE
Paulsen saves $200 Million (estimated) for two years worth of work!
I don't know whether to get pissed off, turn green and rip up the place or cry. unbelievable....

Tue, 03/02/2010 - 21:37 | 251761 merehuman
merehuman's picture

I actually bring home 25,000 per year. But cause i am slow, late  and short of money i get the penalties and add ons. Turns out i end up owing 10,000.00 per year to the irs.

This was my last year in business. Licenses, insurance, bond, house insurance, truck insurance, plates, lic. renewal, city work permit, county building permit.

Got freedom?  one meal per day and a sleeping bag is all i really need. But all these years i have been paying out the ass. I am so tired of it. All that for a life style?

Been a hobo many years as well and had more quality in my life, because the time(limited life span) was my own.

I thought i could live in a happy place in the middle, but found society saddles one with more , and more and MORE.  DONE

Tue, 03/02/2010 - 18:05 | 251582 Hughe Crapper
Hughe Crapper's picture

Who saw the video of Charlie Munger about derivatives? Point made.

Simon Johnson finds that 95 procent of all OTC derivatives are controlled by 5 WallStreet banks. Thats the 'real' reason the TARP bailout was done. Approx 500 trillion in nominal value for a bunch of interconnected zombie paper.

The entire world is captured by WallStreet and their Keynesian deathtrap, only because the US had no other option to keep the system running, thereby inflating the currency lower.

In my opinion, the other 5 percent of derivatives are not really a problem to unwind or expire over time. But with the US inflating, contraction of the banking system will be detrimental for non-dollar denominated exports as the currency will get stronger from credit contraction and unwinding of derivatives. A deadlock for the Euro.

Am I far off?

 

Tue, 03/02/2010 - 20:39 | 251732 Rick64
Rick64's picture

Didn't see the Munger video, but I suspect that the problem is much bigger than they are letting on. You are correct in that the derivitives market is a complex problem now that they let it get out of hand. In 1998 it was estimated at 25-30 trillion and now it is at 600 trillion. This is all derivitives combined. A good documentary about this is "The Warning" on Frontline. You will see they let this run wild with no regulation purposely. They were warned 11 yrs. ago.

Tue, 03/02/2010 - 15:06 | 251306 Anonymous
Anonymous's picture

When you can buy assets without paying for them, you can get control of a lot of assets. Fractional banking basically means allowing bankers to buy assets without having to pay for them. Wizard of Oz.

Tue, 03/02/2010 - 15:00 | 251289 Leo Kolivakis
Leo Kolivakis's picture

Concentrate power in the hands of a few, allowing your economic elite to financially rape the population at perpetuity.

Tue, 03/02/2010 - 14:05 | 251208 Frank Owen
Frank Owen's picture

Just round up all the banks, military, government, private businesses, into one too big to fail corporation and call it Ingsoc, mmkay? Thanks GW.

Tue, 03/02/2010 - 19:09 | 251671 Dirtt
Dirtt's picture

Yes George.  But you managed to do it once.  We can do it again.

Frost-bitten and famished. But we can do it again.

Tue, 03/02/2010 - 13:47 | 251180 Anonymous
Anonymous's picture

Are you so sure that, when asked to dance banks do not dance?
Would it not describe better a feudal relationship, I keep my job and the grafts attached and switch power over to the republic.

Tue, 03/02/2010 - 13:23 | 251136 Anonymous
Anonymous's picture

The article got my attention, on the promise that the too big to fail banks were created.

After reading the various references, nothing is advanced to support that point.

Got my attention because it is known the too big to fail status is achieved through competition: anyone reaching a certain plateau in terms of competitiveness tries to convert this competitiveness into a more durable competitive edge. So a claim of the opposite might be worth reviewing.

Done on a daily basis by many people around the world.

Too big to fail is not a product of the government. Simply some banks have grown big (competitive) enough to play ball with the government and graving that into the stone.

The government failed to resist this process.

That government woman is delusional: the government did not make the banks. The fact is the government could not resist the banks.
Governments all around the world are in game theory cartels. Banks know how to deal with cartels. At least, the one who achieved the critical mass needed to treat governments as cartels.

The article failed.

Tue, 03/02/2010 - 16:01 | 251391 Anonymous
Anonymous's picture

I'm afraid your comment/post also failed. OF COURSE the TBTF were created - at least their too big to fail status was - the logic underpinning the assertion is simple: other banks fail over and over, the TBTF do not and its is NOT due to any competitive advantage or competition at all. The govt makes sure they DO NOT fail, and give them their competition on a silver FDIC platter. How can TBTF ever be achieved by competition - it can't it implicitly needs an outside guarantee that they will not fail. After all they are all zombies that should be in receivership - but then they will not be able to hand out campaign goodies to politicians...

Wed, 03/03/2010 - 07:06 | 252078 Anonymous
Anonymous's picture

First piece of news: too big to fail does not mean that failure is not in the cards.

Too big to fail means that in case of imminent failure, others are going to take action in order to prevent the failure from happening as the failure would cost them more than they take action to prevent the failure.

This is what too big to fail means.
I cant believe some people try to sell it means that failure is not in the cards.
Too big to fail is a result of competition and in itself a competitive advantage.

The opposite is too small to care.

Too big to fail: players who are so big their downfall will impact more the whole system than a rescue would. Hence when failure is imminent, either you flush down a large part of the system or you prop them up.

Too small to care: players who are so small no one notice when they fail.

Banks through competition, for some of them, have achieved the too big to fail status. The government writing this status into laws is the consequence not the cause.

----------------------------------------------------------

Stiffling competition? There is nothing like stiffling competition. You are confusing with stiffling concurrence.

Stop watching your rigged competition scene known as US sports. Get out of your couch. A competition is much more than something you reset each season in order to sell it as a product to consumers.

Stiffling concurrence is an inherent part to competition.
When you enter a competition, that is to end it(in your lingo, win it), not maintaining it as long as it pleases you.

You dont end a competition without stiffling the concurrence. Stiffling the concurrence is one major way to end a competition.

Competition has only one requirement. Only one. That is being as competitive as you can.

This is achieved by:
-increasing your own competitiveness
and/or
-decreasing the concurrence's competitiveness

Read well the second option. It includes stiffling the concurrence.

What else? When I referred to cartels, it was in the context of games theory. And you missed the whole point.
When a bank through competition achieves the status too big to fail, at this point, their perception of the governments can be changed into something more profitable to them, leading the governments to be treated like cartels.

As to banks being the government, well, I ran out of time but hey, it is so poor nothing should be needed here.

Tue, 03/02/2010 - 15:50 | 251374 WaterWings
WaterWings's picture

Hey, anon, good one, +1'ed yourself. Let me help you out:

...it is known the too big to fail status is achieved through competition...

No, they achieve greater market share by stifling competition.

The government failed to resist this process.

Nope.

Too big to fail is not a product of the government.

That's pretty damn naive.

The fact is the government could not resist the banks.

Our government is the banks...

Banks know how to deal with cartels.

...because the banks are a cartel.

So a claim of the opposite might be worth reviewing.

Thanks for playing, anon.

Tue, 03/02/2010 - 21:26 | 251752 merehuman
merehuman's picture

and that is the beauty of ZEROHEDGE.

This works better than the market. There we try to find price (and fail)

Here we try to find truth , and we win.

Tue, 03/02/2010 - 16:46 | 251469 ThreeTrees
ThreeTrees's picture

+100

TBTF is a product of government, period.  Goldman and probably many others wouldn't even exist in the same way today if it wasn't for TBTF.  It doesn't matter how big they get they can't escape the market and this depression proves it.  The whole purpose of government intervention over the past 2-3 years has been to prop up asset values and protect the paper solvency of the TBTFs.

The market is felling these giants that government has created.

Tue, 03/02/2010 - 13:54 | 251196 Anonymous
Anonymous's picture

+ 1

Tue, 03/02/2010 - 12:55 | 251095 SRV - ES339
SRV - ES339's picture

If this is true, they should be able to pick up the health care tab for all!

Something is seriously wrong with these numbers... if not, sign me up for the liberation forces (no guns here, but I'm sure I could get a few of them "hand to hand" before they get me).

Tue, 03/02/2010 - 12:49 | 251083 Anonymous
Anonymous's picture

I so glad we have an effective set of antitrust laws.

Tue, 03/02/2010 - 11:52 | 250978 Obaminator
Obaminator's picture

Well....we didnt think they were gunna walk away with nothing did we?

Tue, 03/02/2010 - 11:04 | 250918 Anonymous
Anonymous's picture

It is trending towards truth, money supply worldwide has roughly increased by 40 trillion usd in the last 10 years.
This money supply is stocked in alphabet at the letter "F" for failed in real estate.
http://dollardaze.org/blog/?post_id=00565

Tue, 03/02/2010 - 10:17 | 250885 Anonymous
Anonymous's picture

The problem is likely a comparison of nominal balance sheet versus inflation-adj GDP.

It tends to be hard to find pure "nominal GDP" numbers.

Given that nominal GDP growth is 5-7% annually... 15 years ago it was 35-50% of today. Or 5-6T. So the "top 6 banks" only had $1T in assets in 1995? Hmm.

Tue, 03/02/2010 - 10:12 | 250878 Anonymous
Anonymous's picture

I call bullshit.

Those #s are wrong.

(%-share of GDP did not 4x in 15 years... not correct)

Tue, 03/02/2010 - 15:48 | 251372 Anonymous
Anonymous's picture

Actually, since GDP is flow of funds and this is comparing total assets, it's not so unreasonable. It's also kind of like comparing apples to Big Macs, but that's beside the point - which is that the TBTFs are very very large.

Tue, 03/02/2010 - 12:15 | 251017 Ripped Chunk
Ripped Chunk's picture

Here is today's rate sheet: https://online.citibank.com/US/JRS/pands/detail.do?ID=SvgCDs

Go open an account with them today.

Tue, 03/02/2010 - 19:42 | 251703 Anonymous
Anonymous's picture

Wow! I can put in $10K in a Citi CD today, and make a whole $80 after a year! What a deal!

I could probably find that much change on the street over the course of a year.

Wed, 03/03/2010 - 00:50 | 251962 dark pools of soros
dark pools of soros's picture

stop robbing their revenue streams

Tue, 03/02/2010 - 16:43 | 251460 Frank Owen
Frank Owen's picture

Listened to him a fair bit but had no idea he wore a patch.

Tue, 03/02/2010 - 10:12 | 250876 Rick64
Rick64's picture

Brings a whole new meaning to TBTF.

Tue, 03/02/2010 - 09:52 | 250859 Anonymous
Anonymous's picture

Bedford Falls, this is Pottersville don't you think I know where I live, this is Pottersville I tell you!!

Tue, 03/02/2010 - 11:28 | 250948 Anonymous
Anonymous's picture

Brilliant !!

Tue, 03/02/2010 - 09:50 | 250858 10044
10044's picture

One must be dumber than dumb to have more than 2k in the bank. FDIC is BROKE. Move your money to brokerage acct and get cash in your home safe. When citi wants 7 days notice for withdrawal, you know it's time to head for exit

Tue, 03/02/2010 - 20:00 | 251716 Anonymous
Anonymous's picture

Hell, have you SEEN the employees they've got at Wells Fargo these days? I'd be afraid of making large cash withdrawals, lest a tattooed, dope-smoking teller or manager take note and flag you for an after hours visit from a couple of their friends, to relieve you of your "ill-gotten gains."

Or am I just paranoid?

Wed, 03/03/2010 - 00:49 | 251961 dark pools of soros
dark pools of soros's picture

dope smoking thugs aren't the ones to worry about..the sober ones are

Tue, 03/02/2010 - 10:15 | 250882 Postal
Postal's picture

Used coffee "cans" (they're actually plastic, nowadays), and a good shovel. Hey, it's not like burying it in the ground is costing me interest or anything.

Thu, 03/04/2010 - 19:28 | 254265 Anonymous
Anonymous's picture

Actually it is. Your money will lose value due to inflation. It's a hidden tax that goes straight into the big banks' pockets via fractional reserve lending.

Tue, 03/02/2010 - 08:29 | 250826 Anonymous
Anonymous's picture

Just goes to show how disfunctional US legal largesse really is....

Know this....

The GOVT. is WHERE THE MONEY IS.....

Tue, 03/02/2010 - 06:43 | 250790 Hephasteus
Hephasteus's picture

I don't like the scary animated gif.

Tue, 03/02/2010 - 13:43 | 251174 macfly
macfly's picture

I know, it appears to have inevitability of a game of Pacman!

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