Last Friday, the Office of the Comptroller of the Currency reported that for the first time in history commercial US banks have suffered a $3.4 billion quarterly loss in a giant sector that they thought, until now, was solid: that is, bets on interest rates. The loss was more than seven times worse than their previous quarterly loss in that category.
Of the total derivatives loss, only 7.8 percent was in credit default swaps, the instrument that brought down AIG. Notably, 82 percent of total losses were in interest rate derivatives, the solid category. The remainder is in “other.†U.S. banks, alone, control $204 trillion in derivatives today. These facts came from the notable Dr. Martin Weiss. A more detailed look is linked here.
But first, consider the most breathtaking losses of the Wall Street casino came from America’s five biggest banks. In fact, Bank of America’s total derivatives risk is at 179 percent of its risk-based capital; Citibank’s was at 278 percent of its risk-based capital; JPMorganChase was at 382 percent of its risk-based capital; and Goldman Sachs’ total credit exposure at year-end was at a whopping 1,056 percent, or over ten times more than its capital. Do you get the picture now?
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