We covered briefly the subject of the derivative time bomb that may collapse the world economy in the previous blog titled “What’s a Derivative Mommy“, so this a a follow up blog post covering the big banks and their derivatives exposure.
There are five “too big to fail / jail” banks in America. These banks collectively have approximately $300 trillion in derivatives. This list compiled from the McAlvany Intelligence Advisor, December 2015 can be seen below.
JPMORGAN CHASE
Total Assets: $2,476,986,000,000 (about $2.5 trillion)
Total Exposure To Derivatives: $67,951,190,000,000 (more than $67 trillion)
CITIBANK
Total Assets: $1,894,736,000,000 (almost $1.9 trillion)
Total Exposure to Derivatives: $59,944,502,000,000 (nearly $60 trillion)
GOLDMAN SACHS
Total Assets: $915,705,000,000 (less than $1 trillion)
Total Exposure To Derivatives: $54,564,516,000,000 (more than $54 trillion)
BANK OF AMERICA
Total Assets: $2,152,533,000,000 (a bit more than $2.1 trillion)
Total Exposure To Derivatives: $54,457,605,000,000 (more than $54 trillion)
MORGAN STANLEY
Total Assets: $831,381,000,000 (less than $1 trillion)
Total Exposure To Derivatives: $44,946,153,000,000 (more than $44 trillion)
In 2008, we were told that the potentially catastrophic problem of the “too big to fail” banks would be brought under control. But instead they have grown 37% since that last recession. Currently, these five largest banks account for 42% of all loans in the US, and the six largest banks control 67% of all banking assets.
And it isn’t just US banks that are engaged in this type of behavior. As Zero Hedge recently detailed, German banking giant Deutsche Bank has more exposure to derivatives than any of the American banks listed above. Deutsche has a total derivative exposure that amounts to €55 trillion or just about $75 trillion. That’s about 100 times greater than the €522 billion in deposits the bank has. It is also five times greater than the entire GDP of Europe and approximately equal to the GDP of the entire world. It is no secret in the entire financial world that Deutsche Bank is in serious trouble – right now! Will the present German refugee crisis and resultant political upheaval trigger big problems in the German banking sector? We shall see!
There are scores of other economic data, such as the stock and bond markets, the debt debacle, the credit bubble, currency, and trade data that supports the notion there is a global financial meltdown on the horizon. It’s time to hedge against this by getting out of the system and this will be covered in another blog post.