Recent Items

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

Posted on by

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.

create animated gif

(If the image doesn’t load, click here.)

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.

Print Friendly
Twitter0DiggReddit0StumbleUpon0Facebook14LinkedIn0Google+0bufferEmail

14 comments

  1. mp

    Sometime during the mid-90s, I recall seeing a letter from the president of the Richmond Fed to Greenspan. The letter mentioned that, by the end of the decade, they expected the top half dozen or so banks to have something like 90% of the retail business. I’ve got a copy somewhere.

    So, there is no surprise here. They expected it and they applauded it.

    Meanwhile, I strongly recommend that, if you don’t have a Kunstler-style place in the woods, you should consider buying one.

  2. Ina Pickle

    I suppose it would be one thing if they got their deposits by being so much better than the competition; however, I know that Chase got my deposits by swallowing my bank. I’ve since removed my deposits.

    At the same time, they have been working to completely gut the antitrust laws. In the last year of the Bush presidency, the DOJ put out guidelines saying in effect that vertical integration should never be a concern any more, from an antitrust perspective. . . .yet another law passed around the time of the last crisis (the Sherman Act) that our brave leaders decided was no longer necessary.

    There are a lot of fronts on which this effect is occurring. The finance sector just happens to have the nation by the throat, but other places where it is less obvious are likewise experiencing consolidation.

  3. kssong

    ‘…economics-the power of money-has become the method of choice for control of the masses by the inner elite…’Jim Marrs.

  4. Toby

    Because there can be no such thing as perfect competition, “free” markets are cartel/oligopoly/monopoly creating processes. There’s no need for conspiracy, cartels and monopolies are an inevitability. Ironically, markets seem to require state intervention to keep competition alive. But that’s probably another impossibility.

    Something’s got to give.

  5. Cynthia

    “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.”

    So I guess this means that The Vampire Squid should be renamed The Great Attractor. But more importantly, The Great Vampire Squid should be renamed The Shapley Supercluster.

    http://en.wikipedia.org/wiki/Shapley_Supercluster

  6. Yori

    does anyone realize that the US is kind of an anomaly in the world as far as banking concentration goes. in many countries there’s only a few banks that make up sometimes upwards of 90% of the market share. take the american northern neighbor in canada. you have literally 5-6 banks that control over 90% of the whole banking market! (RBC, CIBC, TD, BMO, Scotiabank and National Bank). and that is also the case in other countries as well like switzerland, germany (depending on how you count the LB`s)and to some extent even japan and korea plus more than i dont know the stats for or havent mentioned. besides just having big banks you probably need more discipline as far as focus goes if the backstop is going to be the gov`t in a big bank model (i.e. swinging for the fences and a quick buck with a quick trade through prop trading versus the slow and steady pace of loan growth and retail deposits that banks have generally followed in the past)

  7. asphaltjesus

    Toby’s right, mature markets destroy value and limit competition. If the governments *don’t* intervene, you get the same results anyway.

    There’s too much hyperbole in this post.

Comments are closed.