JPMorgan Wants Another Financial Crisis
Does JPMorgan want another banking crisis? That's certainly how it appears. If the investment bank and its competitors have their way, it will only be a matter of time before taxpayers are forced to rescue the banking system again.
JPMorgan leads the "counteroffensive"Last Thursday, the bank sent its chief risk officer to Congress to request that lawmakers block new global rules that would impose a capital surcharge on banks that are "too big to fail," on top of the 7% minimum ratio of common equity to risk-weighted assets agreed to under Basel III. The latest figures under discussion by global regulators would impose an extra 2.5 percentage points on at least eight global banks, including JPMorgan Chase (NYSE: JPM ) , Bank of America (NYSE: BAC ) , and Citigroup (NYSE: C ) , for a minimum ratio of 9.5%. In the next group down, Morgan Stanley (NYSE: MS ) andGoldman Sachs (NYSE: GS ) would face a surcharge of 2%, for a 9% minimum.
How do these banks stack up presently? The following table contains my estimates of tier 1 common equity ratios under the Basel III standard:
Company | Tier 1 Common Equity Ratio (% of Risk-weighted Assets), March 31, 2011 | Tier 1 Common Leverage, March 31, 2011 |
|---|---|---|
| Bank of America | 6.9% | 14.5 : 1 |
| Citigroup | 9.1% | 11.0 : 1 |
| Goldman Sachs | 9.2% | 10.9 : 1 |
| JPMorgan Chase | 7.3%* | 13.7 : 1 |
| Morgan Stanley | 8.6% | 11.7 : 1 |
| Titanic Fleet | 8.1% | 12.4 : 1 |
Source: Company filings. "Titanic fleet" refers to the combined figures of the five banks.
*JPMorgan's own estimate.
*JPMorgan's own estimate.
Company | Tier 1 Common Equity Ratio (% of Total Assets), March 31, 2011 | Leverage, March 31, 2011 |
|---|---|---|
| Bank of America | 5.4% | 18.4 |
| Citigroup | 5.8% | 17.3 |
| Goldman Sachs | 5.6% | 17.8 |
| JPMorgan Chase | 5.4% | 18.4 |
| Morgan Stanley | 3.9% | 25.9 |
| Titanic Fleet | 5.4% | 18.6 |
Sources: Company filings and Capital IQ (a division of Standard & Poor's). "Titanic fleet" refers to the combined figures of the five banks.
http://www.fool.com/investing/general/2011/06/20/jpmorgan-wants-another-financial-crisis.aspx
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