Maintaining the illusion that all is under control in the world of global finance, requires all the players—the bankers, the regulators, the non-bank speculators, et. al.—to keep up a solid public front, something that is increasingly difficult as the system blows apart and the various factions fight for survival. Behind the crumbling facade is a deadly war of each against all.
Take the case of JP Morgan Chase CEO Jamie Dimon, who threw a hissyfit against Bank of Canada Governor Mark Carney in a private meeting of bankers and regulators in Washington on Sept. 23. Dimon has been on the warpath against regulators, accusing them of promoting new regulations that would hurt the banks, and has even accused regulators of being "un-American"! This, from the most British of big U.S. banks! We suspect Jamie is hysterical because he sees doom coming down the pike at a rapid clip.
Lord Paul Myners, former Financial Services Secretary at Her Majesty's Treasury ("City [of London] Minister"), is publicly suggesting that HSBC—the world's top dope bank—move its UK retail banking operations to France, to avoid the "ring-fencing" separation of its deposit-taking and investment-banking operations recommended by the Independent Commission on Banking. Myners recommended that HSBC operate in the UK through its French bank CCF, a founding member of the Inter-Alpha Group until it was acquired by HSBC.
EIR's review of global bank performance since July 2007 shows a devastating picture of huge losses, vaporizing market capitalization, soaring derivatives speculation, and a lack of business to support all the institutions which remain today. It's a dog-eat-dog world, and there is not nearly enough food to go around.
For example, the stock prices of most of the biggest banks in the world have plunged dramatically since Lyn's July 25, 2007, webcast declaring the death of the system. Among the Inter-Alpha Group, Royal Bank of Scotland is down 96%, Commerzbank is down 94%, Societe Generale is down 84%, Intesa Sanpaolo is off 74%, and Santander is down 37%. In the U.S., Citigroup has fallen 94%, Bank of America 86%, Morgan Stanley 78%, Goldman Sachs 52%, Morgan Chase 28%, and Wells Fargo 23%. As devastating as those numbers are, they should all be 100%, as befitting dead institutions.
While their market values have plunged, the derivatives holdings have soared, at least among the U.S. banks where figures are available. The derivatives holdings of commercial banks in the U.S. have increased by $96 trillion (62%) since June 2007, to $251 trillion. It's even worse at the holding company level, where derivatives holdings at the top 25 have increased by $172 trillion to $333 trillion, more than doubling during a period in which assets—another hotbed of fictitious capital—rose 32%.
The banks will soon begin reporting their results for the third quarter, which ended Friday, and it will not be pretty. Investment-banking revenue will be off 35%-45% at the big banks, according to estimates from Deutsche Bank, and overall quarterly losses are expected even at Goldman Sachs. Expect the cover stories to fly fast and furious, as attempts are made to divert attention to individual banks, when the real story is the death of the system, and every institution within it.
Meanwhile, the police state is expanding around Wall Street, where New York's own Mussolini, Mayor Mike Bloomberg, has had the NYPD increase its surveillance of the area and crack down on those who dare to protest against imperial finance. Lower Manhattan is looking more like the City of London by the day. In addition, the privately owned Federal Reserve Bank of New York is inaugurating its own Internet spy operation, with plans to troll social media sites, blogs, and the like, to locate and squash opposition to its evil plans.
Overall, the picture is one of complete chaos. The financial system is not only eating nations and populations, but also eating its own banks, in a desperate attempt to survive. The Brutish Empire is finished. The Triple Curve is playing out as Lyn forecast: physical productivity is collapsing, financial values are vaporizing, and monetary aggregates are hyperinflating as the bankers try vainly to plug the holes. The only sane alternative is to abandon the Titanic and jump on the LaRouche lifeboat.
While the global economy collapses, the derivatives speculation of the big banks has been soaring. We compare the derivatives levels at the time of Lyn's July 25, 2007 webcast with the latest figures available (Source: Office of the Comptroller of the Currency (OCC)).
June 30, 2007
1. JP Morgan Chase & Co. $ 80.3 trillion
2. Citigroup 34.9
3. Bank of America Corp. 30.3
4. Wachovia 5.2
5. HSBC North America 4.4
Top 25 Holding Companies $160.5
June 30, 2011
1. JP Morgan Chase & Co. $ 79.0 trillion
2. Bank of America Corp. 74.8
3. Morgan Stanley 56.4
4. Citigroup 55.2
5. Goldman Sachs 53.4
Top 25 Holding Companies $332.8
Part of the increase is attributable to the conversion of Goldman Sachs and Morgan Stanley to bank holding companies after the September 2008 crisis, and the absorption of Merrill Lynch by Bank of America. When the investment banks were added to the totals in the first quarter of 2009, the total for the top 25 holding companies jumped $117 trillion to $291 trillion, from $174 trillion in the fourth quarter of 2008. This would not have been possible had Glass-Steagall remained in effect.