U.S. bank’s assets bigger than GDP

February 21, 2013 by · Leave a Comment
Filed under: Opinion 

Banking assets equaling the U.S. GDP, scary thought.  According to Bloomberg, 50% of these assets are off balance-sheet and are compromised of derivatives (bets) and other risky loans.  With banking officials not being accountable to the same laws as the U.S. citizenry and this amount of ownership in Dollar assets, will not end well.

The math is starting to paint a bleak picture and we are seeing precedent that is backing up much of the dissenters message on these subjects.    Too Big to Fail, Too Big to Jail, what does that mean?  It sounds like we have a financial super-structure that is considered untouchable by the people who we elect and or expect to be upholding the rule of law in the name of Justice.

Think about it.

Bloomberg - That label, like a similar one on automobile side-view mirrors, might be required of the four largest U.S. lenders if Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp., has his way. Applying stricter accounting standards for derivatives and off-balance-sheet assets would make the banks twice as big as they say they are — or about the size of the U.S. economy — according to data compiled by Bloomberg.

“Derivatives, like loans, carry risk,” Hoenig said in an interview. “To recognize those bets on the balance sheet would give a better picture of the risk exposures that are there.”

U.S. accounting rules allow banks to record a smaller portion of their derivatives than European peers and keep most mortgage-linked bonds off their books. That can underestimate the risks firms face and affect how much capital they need.

Using international standards for derivatives and consolidating mortgage securitizations, JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. would double in assets, while Citigroup Inc. would jump 60 percent, third- quarter data show. JPMorgan would swell to $4.5 trillion from $2.3 trillion, leapfrogging London-based HSBC Holdings Plc and Deutsche Bank AG, each with about $2.7 trillion.
World’s Largest

JPMorgan, Bank of America and Citigroup would become the world’s three largest banks and Wells Fargo the sixth-biggest. Their combined assets of $14.7 trillion would equal 93 percent of U.S. gross domestic product last year, the data show. Total assets of the country’s banking system would be 170 percent of economic output, still lower than 326 percent for Germany.

U.S. accounting rules for netting derivatives allow banks to erase about $4 trillion in assets, the data show. The lenders also can remove from their books most mortgages they package into securities, trimming an additional $3 trillion.

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