Once again in the third quarter the big Wall Street banks reported very large profits while continuing to withdraw bank credit from the economy. This although they kept piling in new volumes of deposits, growing bigger and bigger under the care and feeding of the Federal Reserve. These banks stack up the savings of the entire nation — and other countries as well — while failing to lend them out for any productive purpose, using them for speculations and “trading profits” instead.
Citigroup’s total deposits shot up in the third quarter, according to its report, to $1.26 trillion while its loans stagnated at $719 billion; that’s a loan-to-deposit ratio of 58%, and Bloomberg News noted Oct. 13 that it was 64% one year ago. This has been going on for the entire decade-plus since the global financial crash. In 2010 loans were $730 billion, and deposits $880 billion, so that ratio was 82%. For the 21st century prior to the 2008 crash, the ratio hovered around 100%.
As for JPMorgan Chase, you have to go back to 2000 to find the point when the loan-to-deposit ratio was still about 100%. In 2020 Morgan’s deposits shot up to $2.001 trillion, while its loans remained at $990 billion, so its loan-to-deposit ratio had become just 48%!
Wells Fargo’s deposit base at the end of the third quarter was just under $1.4 trillion, while its loans outstanding have shrunk by almost $100 billion during 2020, to $920 billion; a loan-to-deposit ratio of 66%.
The loans and leases of the entire U.S. banking system, completely dominated by the Wall Street giants, have dropped by 3% since May, from $10.82 trillion to $10.49 trillion, while deposits have risen by 3.7% to $15.682 trillion. Even the total bank credit outstanding of the banking system, at $14.907 trillion, is 5.2% less than its total deposits, according to the latest Federal Reserve’s “H8” weekly form. Just one year ago, total bank credit was 6% higher than total deposits.
A secondary casualty here, is the idea held by many well-intentioned economists that all money — certainly all deposits — is created by bank loans. The $5 trillion gap between loans and deposits here, gives away that “the government” created all those deposits — or, rather, the Federal Reserve Bank. The Fed and Wall Street together are withholding them from the economy, and actually withdrawing, not adding credit to revive real economic activity. These Wall Street banks have to be promptly broken up by a Glass-Steagall Act reorganization in order to restore the bank credit channel to the economy.
