Too Big To Fail Banks Are Taking Over As Number Of U.S. Banks Falls To All-Time Record Low
By Michael Snyder, on December 3rd, 2013
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.
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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By Michael Snyder, on December 2nd, 2013
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