Posts Tagged ‘Goldman Sachs’

Bank Wealth Plunge

With the European bank issues, Moody’s Investors Service (MCO) has cut the debt ratings on five large U.S. banks, along with those of 10 other global financial institutions.

  • Morgan Stanley (MS) received a two-notch cut
  • Bank of America (BAC), which got a one-level cut
  • Citigroup (C) received a two-notch cut
  • Goldman Sachs (GS) received a two-notch cut
  • JPMorgan Chase (JPM), received a two-notch drop.

Other non-U.S. banks that were downgraded include Barclays (BCS), BNP Paribas (BNP), Credit Agricole (ACA), Credit Suisse (CS), Deutsche Bank (DB), HSBC (HBC), Royal Bank of Canada (RY), Royal Bank of Scotland (RBS), Societe Generale (GLE), and UBS (UBS). With Credit Suisse receiving the biggest downgrade of 3 notches.

Moody’s cited the banks’ shrinking growth and dimming profit forecast in explaining the downgrade. The ratings agency also highlighted the firms’ exposure to the capital markets at a time of significant market volatility. “All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” said Moody’s global banking managing director Greg Bauer in a statement.

It’s possible now that this could increase borrowing costs as more trading partners could require more skin in the game.

The number of Credit Union Membership is fairly well-distributed across the various Asset Group Sizes in terms of percentage. Credit Unions have reached $926 million in total assets as of 2010. Compared to their banking brethren, it pales in comparison.

Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup, and Goldman Sachs each are larger in asset size than ALL the Credit Unions combined. The top 5 banks now control 50% of the assets in these institutions, and just two years ago it took the top 15 banks to control 50%. Banks have slightly more institutions than credit unions, however the bigger credit unions are garnering a larger % of the asset pie just like the bigger banks.

What is abundantly clear…

  • 82% of the credit unions have an asset size <$100 million.
  • 53% have asset size <$20 million.
  • The big have become too Big to Fail.
  • Both FDIC and NCUSIF funds are basically insolvent, and will have to collect for years the premiums to pay for past failures.
  • These institutions will hasten mergers and failures if we have another financial meltdown.

Credit Union Asset Group Members