Anyone seen the bank leverage numbers?

[TwixVoy]

The banks are WAY over leveraged.

Citi: 46.7
Bank of America: 31.7
Chase: 25.8

These numbers mean that, for example, for every ONE dollar Citi has to its name it OWES 46.7 dollars.

So say you were personally in the same situation as an individual as Citi. That would mean that - for example - you had $20,000 to your name.... but you would owe your creditors $934,000.

Now keep in mind these banks are dealing with BILLIONS of dollars here..... And these banks are actually LOSING money at this time. They are NOT bringing in more money than they are putting out. Therefore these numbers are actually going to increase from here. We are up shit creek with out a paddle folks.

[Idealism]

1. While Citi has appeared to releveraged themselves

The rest of the major banks seem to have bucked the trend and started the painful process of de-leveraging. Goldman was leveraged at over 33:1 much of 2008, with Wells Fargo close behind. Nationalization is probably the only way to keep Citi afloat.

[sandnsea]

2. There are people with $2,000

Who wouldn't think anything about owing $93,400 on their home - if that's what we're talking about here.

[underpants]

3. The rules changed a few years ago (guess when) they can be 32X debt to equity

or it might be 36X. It used to be 12X

I saw Cenk on The Young Turks talk about this-I checked it out and he was right

[Idealism]

4. A 2004 SEC Ruling changed it from what was effectively

11.5:1 to (about) 34:1

If these numbers are correct that the WSJ graph gives, then Citi is insolvent. Their stock price has dropped 30% in the past week and a half, costing them billions in what little equity they have left.

[underpants]

5. Right

thanks. I looked but couldn't find it. Long NYT article a few weeks ago.

[metapunditedgy]

7. When the leverage numbers changed, how could they *not* know that

the result would be several years of boom economy (as money is effectively printed by the banks), and then a terrible day of reckoning?

[underpants]

8. The Young Turks (can't find the video) had a great analysis of this

Cenk compared not only the ratio changing but that the banks were basically paid (fees etc.) to bet more. To throw more money on the table. The more they bet the more they individually made. It was a blackjack anology wherein someone pays you $20 every time you bet $5 win or lose.

[Idealism]

10. They were told nothing could go wrong, in a sense

Moodys and Fitch and S&P told the SEC that investment banks essentially hedged enough risk that tripling their allowed debt to equity ratio would result in little (if any) more exposure to risk than the current system under 10:1, due to credit-default swap proliferation and the instruments that allowed banks to buy what were in essence insurance policies against each other. Their computer models showed them no problems, but as we all know now, the models were flawed. They didn't take into consideration a downturn in the economy. In regards to Moody's and S&P's real estate computations that should have protected investors better against sub-prime mortgages and mortgage backed securities, when asked about their models, the answers were revealing. The rating agencies said their models for real estate couldn't "handle" home prices falling. They only saw them going up, and if they didn't fall but just stagnate, the whole system would collapse (as we all know it did). The SEC, the rating agencies, mortgage brokerages, the whole system is completely fucked in the head and needs a great culling.

[specimenfred1984]

6. Excellent post, points out how bankrupt the entire banking system is

It's being propped up by the FED and propaganda and the hope that it won't collapse. The problem is it has already collapsed, nobody trusts the rip off muthafckers with their constantly changing interest rates, late fees, fictitious charges, derivative trades, fraudulent ratings agencies, criminal real estate divisions, constantly scheming and lying managements, filthy rich and greedy CEOs, fraudulent investment firms, outsourcing and overseas holdings, tax-evasion and bailout-stealing bullshit crimes.

[The Brethren]

9. "We are up shit creek with out a paddle folks."

You are sooooo right!!!

And that doesn't even take in account the disaster our job market is in, workers are losing jobs left and right - including those who have been with a company for 21 yrs., companies are either closing or forced to find "alternative" ways to keep afloat, we're badly losing and have all but lost the battle over foreign-product competition (a.k.a. imports) resulting in more American monies ending up in foreign economies/jobs then ours, along with record breaking national deficit, and so on.

It was also reported in the news within the past few weeks that banks are also pulling the rug out on business owners, (particularly affecting smaller businesses) by not allowing them a loan that they were already approved for due to financial uncertainties even tho. businesses were planning on using those loans to help them pay bills....including pay-rolls, etc. Some businesses are also finding their credit with banks frozen altogether. The domino affect is already taking place.

I've been trying to encourage folks to keep what monies that they can in their banks to help create some stability (w/ the banking industry). However, many people I know, including friends who lost jobs in the past 2 mths., are desperate to pay bills and expenses, thus draining their accounts. Btw, the media is still calling this a very bad "recession". If it keeps up at this rate, it will quickly be a current "depression".

[underpants]

11. 60 Minutes- there is about to be another disaster in COMMERCIAL real estate

we haven't even gotten there yet.

[shintao]

12. Hmmm, I prefer to look at like this..........

For every dollar I invested in Citibank stock on Monday, I will get back 46 times that amount when Obama bails them out. Once again folks, if you have a few thousands to play with, now is the time to buy - because the US government cannot afford to let these people go down. Citibank is the credit cards and poor getting poorer people will use credit this coming year.

[TwixVoy]

13. You don't seem to understand

Most of these banks are screwed in both domestic AND foreign investments. Do you REALLY believe the US has the cash to bail out the entire worlds banking system? And do you really believe the US dollar would be worth a thing after?