Big five in big trouble
Will Goldman Sachs stay standing?
As I reported in Turner Radio Network Part 1, the U.S. Treasury has said that the bank stress test results are not in yet. However, Turner Radio Network published on its blog what it says are the results of the tests conducted on the 19 biggest banks in the United States.
The report says that 16 of the 19 banks are technically insolvent, so if installment loans or other types of loans go into default the banks could go under. It has specific numbers for five giant financial institutions that have credit exposure that exceeds their capital.
By the numbers
Here are the results of the study regarding total credit exposure to derivatives, according to Turner Radio Network:
- Bank of America: credit exposure to derivatives 179 percent of its risk-based capital
- Citibank: 278 percent
- JPMorgan Chase: 382 percent
- HSBC America: 550 percent
- Goldman Sachs: 1,056 percent
That means Goldman Sachs’ credit exposure is more than 10 times its capital.
Facing failure?
Turner Radio Network says that JPMorgan Chase, Goldman Sachs, Citibank, Wells Fargo, Sun Trust Bank and HSBC Bank USA are in danger of collapse. The report says there are “serious questions” about whether these six banks can continue in business.
The report also says “1,800 regional and smaller institutions are at risk of failure despite government bailouts.”
The end of the world as we know it?
The end of the report summarizes its findings pretty well, so I’ll quote it directly:
The debt crisis is much greater than the government has reported. The FDIC’s “Problem List” of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.
Put bluntly, the entire US Banking System is in complete and total collapse.
Discussion of Turner Radio Network Part 2 | Bank Stress Test Results