Crisis? What crisis?*
from David Ruccio
We’re more than seven years out from the most severe economic crash since the First Great Depression and nothing much on Wall Street has changed.
As everyone knows, the Too Big To Fail banks that got us into the current mess are now Too Bigger to Fail. The top five U.S. banks had approximately 30 percent of U.S. banking assets in 1998; this rose to 45 percent by 2008 and to more than 47 percent in 2013 (the last year for which data are available).
Meanwhile, the U.S. banking industry topped off 2015 with record profits of $163.63 billion, the highest net income of any year in the SNL bank regulatory database, which dates back to 1991. The largest four banks—JPMorgan Chase, Bank of America, Wells Fargo, and Citibank—together captured 42.7 percent of the industry’s income in 2015.
And, as it turns out, the three big ratings firms that played such a central role in the financial crisis—Standard & Poor’s Ratings Services, Moody’s Investors Service, and Fitch Ratings—have themselves never been downgraded.
The three issue more than 95% of global bond ratings, a total virtually unchanged from the pre-2008 period.
Profits also are nearing all-time highs as they ride a recent wave of debt sales and push into new lines of business. . .
The fallout from the financial crisis was supposed to crimp the credit-ratings model. Firms awarded rosy ratings to residential mortgage bonds that later soured, triggering widespread losses.
Lawmakers and regulators called for a major shake-up of the way the firms made their money. But seven years later, the industry’s business blueprint—in which banks and debt issuers still pay ratings firms to have their deals graded—remains in place despite concerns about its potential conflicts.
No wonder folks are still angry at Wall Street.
*Yes, for those who follow such things, that’s the image from the cover of the 1975 Supertramp album, “Crisis? What Crisis?”
And just as I posted this, I learned, according to a new Institute for Policy Studies report, the $25 billion in bonuses Wall Street banks handed out to their 172,400 New York City-based employees last year amounted to double the combined earnings of all 895,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.
The Wall Street bonus pool has become so large that in 2015 it would’ve been enough to have lifted all of America’s 2.6 million fast food prep and serving workers up to $15 per hour — and still have had $4 billion left over. Or that bonus pool could have raised to $15 the hourly wage of all our nation’s 1.6 million home care aides or all of our 2.6 million restaurant servers and bartenders.