Evidence demanding the urgent breakup of the big Wall Street banks is now overwhelming. The total of loans outstanding of the “Big 4” of JPMorgan Chase, Citigroup, Bank of America and Wells Fargo has not grown since late 2008, nearly 13 years ago, remaining at $3.6 trillion. The deposits of those four megabanks have doubled during that time, to $6.3 trillion total, thanks to excess reserve creation for them by the Federal Reserve through “quantitative easing” programs.
Thus — leaving aside the two investment banks which now have commercial banking units to suck in some deposits, Goldman Sachs and Morgan Stanley – these four have half their deposits being used by their investment-bank trading desks for speculation in stock, bond, swaps, repo and other derivatives markets. At JPMorgan Chase it is a good deal more than half, in fact, with just under $2.3 trillion in deposits and just $1.01 trillion in lending to the economy.
The entire U.S. banking system is in the already unprecedented condition of deposits being 107% of lending. But it’s because for these four, deposits are 200% of lending!
This means that JPMorgan’s “London Whale” episode of 2012, when nearly $100 billion in deposits were thrown into bond index derivative speculations and $7 billion of them vaporized, has become a minor violation of banking prudence and trust compared to what these Wall Street giants do now.
We can leave aside the “theoretical” problem this creates for the proponents of modern monetary theory (MMT), who insist that all bank deposits are created by commercial bank lending. No, the issue here is the economy, household savings, business capital and payroll accounts, and investment in productive employment and productivity.
What these Wall Street “universal” megabanks are doing — speculating with trillions in deposits, pumping up the “everything bubble” plus $200 trillion in derivatives exposure of these four alone — will soon blow out the financial system if they and several dozen other giant “universal banks” are not broken up in the City of London, Frankfurt, Tokyo and on Wall Street.
What are they doing with it, specifically? HIS Market reported April 16 that JPMorgan Chase had announced the previous day, it plans to invest more than $2.5 trillion over 10 years to advance climate action and sustainable development, after other major U.S. investment houses such as Bank of America and Morgan Stanley also made trillions of dollars of pledges. Move over, BlackRock.
This demands Glass-Steagall and a new international credit system.
