Friday, April 20, 2012

Five US banks hold 56% of the US economy

Public money sure helped the "Big Five" and I'm not talking about the sports retailer.  According to the Federal Reserve, JP Morgan Chase, B of A, Citigroup and Well s Fargo collectively held $8.5 trillion in assets as 2011 entered the history books.   That's equal to 56% of the US economy up from 43% before the crisis hit.  As Rahm Emmanuel said, a good crisis is a terrible thing to waste and the 1% have come out of this one very well off indeed.

These five banks are about double the size they were 10 years ago Bloomberg Business Week tells us and some sections of the capitalist class are concerned about five financial institutions holding such a concentration of society's assets. These banks backed up by what BW calls an "an invisible government umbrella" pose a "clear and present danger to the US economy" a report from the Dallas Federal Reserve stated last month.

The Dodd-Frank legislation was supposed to curb the power of the largest financial institutions, prevent fiurther consolidation and impose capital requirements on banks as well as increase the government's powers to take over any large financial institution facing failure. The banks are boasting that the increase in assets and improved balance sheets are proof that they are stronger now and could weather the next storm so public finds  won't have to rescue capitalism from the edge of the abyss as we did this time. In accordance with Dodd-Frank, the banks are supposed to come up with their plans for preventing a meltdown like 2007 by July of this year.

But BW reports that the ratings agencies are not convinced and that the state will step in again with poublic fiunds to rescue any one of these behemoths that lookls like its going under.   The state is, as Marx pointed out, the executive committee for the capitalist class as a whole and will not allow the system to collapse. No ruling elite commits class suicide.

Some, including right wing workers and small business types who suffer under the weight of the giant corporations argue that the only solution is to break up the big banks but capitalism inherently drives to monopoly.  Bigger is better, more powerful, more aggressive. The big fish always eats the little fish in their world no matter how much legislation is passed. 

If the crisis is acute enough the state will nationalize the banks.  They tend to use the term "conservatorship" here in the US as it sounds less socialistic.  It is in the cards that there will be further crisis in this sector and the economy as a whole.  The US banking and financial system is not immune from the EU's sovereign debt crisis which continues to worsen.  But for some, the crisis is a great opportunity just like 911 was for the defense industry.

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