I gave myriad reasons in Bailout Nation for being strongly opposed to bank bailouts. One of the most compelling factors was the horrific impact past bailouts have had on other competitors in the sector. Bailouts rewarded the worst managements, the least deserving shareholders, and the most reckless creditors. (That’s not how capitalism is supposed to work).

As it turns out, the banking sector is no different than these other industries that have been bailed out. After the government’s largesse, bad companies do well — and at the expense of the well managed, responsible, non-reckless firms.

Forbe’s Bob Lenzner shows us exactly how warped the bailed out banking sector has become: Bob notes that Six giant banks made $51 billion in profits last year, while the rest of the banking industry — the other 980 banking institutions — all lost money.

That is simply astonishing.

As the table below shows, the other 980 that lost money (in the aggregate) — thats a heckuva data point.

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Trading Revenue at U.S. Bank Holding Companies in 2009

All data from December 2009 FR Y-9C filings. Dollar amounts in millions.

Total Assets, Dec. 31, 2009 Trading Revenue Pretax Income As a Percentage of Pretax Income
1 Goldman Sachs Group $849,278 $23,234 $19,451 119.4%
2 Bank of America 2,224,539 12,067 4,592 262.8%
3 JPMorgan Chase 2,031,989 9,870 16,149 61.1%
4 Morgan Stanley 771,462 7,279 857 849.4%
5 Citigroup 1,856,646 4,448 (7,799) N/R
6 Wells Fargo 1,243,646 2,674 17,998 14.9%
Top 6 Aggregate 59,572 51,248 116.2%
7 Bank of New York Mellon 212,336 1,032 2,626 * 39.3%
8 State Street 156,756 598 2,527 23.7%
9 Northern Trust 82,142 508 1,255 40.5%
Trust and Custody Banks Aggregate 2,139 6,408 33.4%
10 MetLife 539,314 361 (2,798) N/R
11 GMAC 172,313 173 (7,939) N/R
534 (10,737) N/R
12 PNC Financial Services Group 269,922 170 3,324 5.1%
13 U.S. Bancorp 281,176 163 2,632 6.2%
14 Fifth Third Bancorp 113,380 125 767 16.3%
15 Sun Trust Banks 174,166 100 (2,450) N/R
Banks Nos. 12 to 15 Aggregate 558 4,273 13.1%
Remaining 971 Bank Holding Companies Aggregate 1,399 (19,284) N/R
All Bank Holding Companies (986 banks) Aggregate 64,202 31,908 201%

* Excludes $4.8B in securities losses related to restructuring of Bank of New York Mellon’s investment securities portfolio in Q3 2009. “N/R” = Not relevant.
Table and data courtesy of Forbes.com

>

Source:
Six Giant Banks Made $51 Billion Last Year; The Other 980 Lost Money
Robert Lenzner
Forbes, 06.03.10, 04:25 PM EDT
http://www.forbes.com/2010/06/03/goldman-sachs-citigroup-markets-lenzner-morgan-stanley_2.html

Category: Bailout Nation, Bailouts, Credit

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

28 Responses to “Six Banks Made $51 Billion in ’09 (The rest lost money)”

  1. cognos says:

    Why is this headline so dumb?

    The article THEN clearly shows that State Street, BNY, PNC, Fifth-Third and hundreds of other banks made money.

    What you really mean to say is that a FEW banks lost alot.

    Why not just say that?

  2. rktbrkr says:

    These same top 5 banks made trading profits every single day in the 1Q, The top tier of banks get free money from the Fed everybody else needs to compete for deposits.

    We have two categories of banks, TBTF and too small to succeed. If one group gets zero cost money and the other doesn’t guess who will do better?

  3. rktbrkr says:

    This is another reason why morality should be a non-issue when it comes to strategic defaults.

    On the other hand these results would look very difeerent if there was accurate accounting for unpaid mortgages.

  4. bsneath says:

    $60 billion in trading revenue siphoned out of the markets. Revenue that one could argue would otherwise have gone to mutual funds, pension funds, insurers, endowments & retail investors.

    1) How does this add value to the general economy?

    2) Why would anyone want to invest when the “house” skims off $60 billion a year?

    Might as well go to Vegas and have a little fun before you get screwed.

  5. Lariat1 says:

    Cognos: Where have you been? A few people here have been wondering about your whereabouts! Like Where’s Waldo?

  6. Chief Tomahawk says:

    I wonder what Dick Bove would have to say about THAT data?

  7. Six giant banks made $51 billion in profits last year

    Sounds like Canada

  8. Moss says:

    Free market capitalism, the best path to prosperity. I would love to hear King dollar himself rationalize these incredible facts. It is ample proof of how corrupt the system really is.

  9. quantacide says:

    Barry, this is a convienient, misleading, and myopic conclusion because (1) the rest of the banks are out of business (or were taken over by those very same top-6 banks the year before) and (2) several of the non-top banks did make sizeable profits. Not to mention Lenzer is fueling the “all banks are just prop trading hedge funds” fire and I’m saddened that you pass along this tripe.

  10. ToNYC says:

    As Balzac said, the secret to a great fortune is a crime forgotten, because it was properly executed. The top five or six banks are like the five families in Godfather I. It was the FED the whole time: these few are the best crews to execute the papering- over of the crime of inventing excess credit for proprietary advantage and public indebtedness. They do the best job of hiding the salami and the rotten cans of fish stashed for future pensions.

  11. Mannwich says:

    Just sickening, Barry. “Free market capitalism” for the little guy/gal, but quasi distorted socialism sprinkled with some fascism for the big, powerful, corrupt and incompetent. And we expect to be in a real “recovery”? “Recovery” my ass. Socializing the losses of the big and powerful while privatizing their gains ain’t a “recovery”. Not even close. Things are getting worse.

  12. Mannwich says:

    Cognos is back! Fantastic. We all missed him and his erudition so.

  13. Mannwich says:

    Quasi-Free market capitalism (like taxes in Leona’s famous diatribe) is only for the “little people” now.

  14. Marc P says:

    Are the net income numbers low? What is the permitted accounting for a gift from the government? Does that show up in these income figures?

  15. louis says:

    With this power concentrated in the few can a government do anything for it’s people when it is truly needed? We saved them, they made billions, and more and more people are forced to Strategically Default.

  16. Darmah says:

    This freaked me out when I read the headline which is definitely deceptive and untrue “(the rest lost money).”

    As is this untrue “the other 980 banking institutions — all lost money.”

    It’s not until you get to “(in the aggregate)”

    Criminy – I was grabbing meds and looking at my bank’s FR Y-9C statement. They made $89M in trading revenue and had $877M net income, BTW.

    The point of the article would have been better served with a better headline, like “Six Banks Made $51 Billion in ‘09 (From Trading not Banking)” or something.

    Sheesh.

  17. shoreb45 says:

    good darmah, very good point. I noticed the same thing just now too.

  18. philipat says:

    Your suggestion might be correct, however, it also raises the question again as to why the US needs a thousand Banks?

  19. constantnormal says:

    I believe that the point here is that consumer banks are not supposed to be hedge funds. That was the purpose behind Glass-Steagall and prevented a lot of banks from blowing themselves up over the 50+ years that Glass-Steagall was in effect.

    And one can easily see, in a New York nanosecond, that the banksters will go to the mat to prevent any restrictions on their ability to do highly leveraged trading with huge fractions of their assets, or to allow anything to come between them and their next taxpayer bailout.

    And the points made about bankster solvency (or lack thereof) if they had to properly account for their toxic debt are just icing on the cake.

    60 Minutes needs to do a show on this, and then follow up with interviews with the clown Senators and Representatives that are so eager to have their palms greased by the banking lobbyists. Or at least, if 60 Minutes did serious investigative journalism any more, they ought to be aiming at this.

  20. constantnormal says:

    To turn this around and look at it through the other end of the telescope, this kinda seems to say that the only thing keeping the entire banking industry from imploding is the mark-to-make-believe accounting and the trading profits of the large hedge funds masquerading as banks.

    The FDIC is taking their time in closing the large (and growing) list of failing banks, keeping up a steady pace of from 3-7 banks closed every weekend, since the start of 2008. Maybe by 2015 or thereabouts we will have recycled most of the banks and digested the losses from our national mortgage implosion.

    Or maybe it might have been better to have performed an FDR-like closing of all the banks (or assimilation within the goobermint during the reconstruction), processing them all and restructuring the system, them re-opening for business with clean slates and all the toxic debt zeroed out. Back in the 30′s when this was done, there were many, many times more banks than we have today, and they managed to complete the task in about 6 months. Our banks and their businesses are a lot more complex today, but then we have automated tools that were not in existence in the 30s. I think we could have done a “melt-and-repour” on our banking system early in 2008 and have had a shot at having a stable banking system by now.

    Yes, it would have provoked a lotta screams and angst, but really, would it have been worse than where we are headed with the EU cracking up? Not that those are either-or situations, the EU would almost certainly have still crashed on the rocks even if we had recreated our banking system, but we would be in a lot better shape to weather the storm today if we had done so then …

  21. louis says:

    We must not forget that we were told that if we didn’t bail out the banks there would be no economy left on Monday.

  22. 777george says:

    From another viewpoint: evidently the big banks especially, are not lending much-so where will the giant job creation push come from if there is so little capital lent especially to the main job creators, businesses small businesses in particuar.

    Actually why should the trading banks lend??? The big ones have been VERY profitable, NOT lending, even to each other. OK the big guys are too big to make commercial loans, they have important work to do not pamper pipsqueaks. Hey, leave that to the LITTLE banks in the interim. No rush, Sheila Bair will give them to you guys so you can get bigger and more socially irresponsible.

    The CPC seems to do a sounder job of asset allocation than our Government. Even if much money is wasted in China, they will have more, really valuable, additions to their infrastructure. What did we get out of the massive asset theft-well, a higher concentration of wealth? The United States of Brazil anyone? Just hope you don’t end up a peon (Go visit Rio if you think that’s a joke!!!).

  23. rktbrkr says:

    Where is the 2.6T debt bone buried? Lehman revisited.
    http://www.nytimes.com/2010/06/06/business/global/06toxic.html

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  26. constantnormal says:

    @louis 11:36 pm

    … and now it turns out that even if we DID bail out the banks, there is no economy left … except for the banks.

  27. theobannion says:

    “Bailouts rewarded the worst managements, the least deserving shareholders, and the most reckless creditors. (That’s not how capitalism is supposed to work).”
    How a system works in the real world can be predicted by analyzing the rewards and punishments built into the system. Preachers who exhort capitalists to “do the right thing” are shouting into the wind; similarly, teaching courses in business ethics is a waste of time, and for the same reason. Capitalism has its own ethos. Its sole mandate is to make money – beat down costs and charge what the traffic will bear. What? – the AIDs patient (cancer patient – fill in your costly disease of choice) can’t afford 20 or 30 thousand dollars a year? Not relevant. What? – it’s immoral to take huge risks, pocket the rewards and pass the losses onto the taxpayer? Not relevant – it’s good business: it makes money. What? – corporations get fined for “doing bad things”? Not relevant, because management has seen to it that, from the beginning, corporations should be seen as “persons” and the corporate person shall be held liable for “its” actions, and those who command the gag-an-elephant salaries and the sink-the-Queen-Mary bonuses shall forever be held safe. Capitalism without regulation is a nightmare with horns turned loose in a glass paradise. People, pursuing their “enlightened self-interest,” the only philosophical precept underlying Adam Smith’s pin factory, will certainly use their fortunes to influence government – it’s in their self-interest. They will hire lobbyists, will campaign for supreme court and appelate court justices for the same reason. And as a moral precept, pursuing one’s “enlightened self-interest,” is meaningless. Serial killers pursue their enlightened self-interest, as do the Bush family, Blue Beard the Pirate, and yourself, myself, and our readers. The “enlightened” part is always the rub: It’s the self that determines what is or is not enlightened.
    As usual, Barry you’re on the money. But don’t expect any system to do the right thing. A system is like a robot: You can program it to do anything. This robot is programmed to make money, by fair means or foul; there’s nothing else in its memory banks.

    SOB/RBG
    riverboatgamblerSTtrader.blogspot.com

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