It's the same old story. Corporations make massive amounts of money, while the working class has to budget to make ends meet. It is an infuriating fact of life that never seems to end.
It's a festivous miracle in July! Those poor banks who were in such dire straits that they needed government hand outs a few years ago by way of tax payer money are somehow making tremendous amounts of money despite "tough" new regulations and capital requirements. Why, it's almost like they're not telling the truth when they warn, repeatedly, that these new rules will destroy their profits and the economy.
But since when does big business engage in deception? The very idea is almost unfathomable.........
Yesterday Goldman Sachs reported second quarter earnings of $1.86 billion, up 100 percent from a year ago.
The average American will never see a 100 percent raise in their lifetimes.
The high numbers make Goldman the latest big bank to not only survive but thrive in the post-crisis era, when everybody hates banks and is trying to crimp their pay and their risk-taking.
Goldman followed Citigroup (profits up 42% to $4.18 billion), JPMorgan Chase (profit up 33 percent to $6.53 billion), and Wells Fargo (profit up 19 percent) to $5.5 billion) in reporting second-quarter results that astounded Wall Street forecasters.
It's part of a glaring long-term trend since the crisis. Banks have been repeatedly smashing profit records despite a sluggish economy, sluggish deal-making, lower risk-taking and an onslaught of new rules that they complain about endlessly.
The irony lyes in the fact that all of these new bank regulations or capital requirements are not in place yet. Regulators have finished less than 40 percent of the rules required by the Dodd-Frank Act. In simple terms, Dodd-Frank is a law that places major regulations on the financial industry. It grew out of the Great Recession with the intention of preventing another collapse of a financial institution like Lehman Brothers.
Regulators have only recently proposed new requirements that the biggest banks raise more capital and take fewer risks. Banks and their lobbyists will have a couple of months to complain about those rules, and they seem to be hinting that they may even loosen their own restrictions. Doubtful, but time will tell.
But banks are in many cases already acting as if they are constrained by the new rules. They are taking fewer risks, and raising more capital. Citigroup, for example, said it had a "leverage ratio", the ratio of capital to total assets of 4.8 percent in the second quarter, just under the 5 percent required by those terrifying new rules that bank mouthpieces have warned will crush lending. Its banking unit, which takes secured deposits from customers, had a leverage ratio of 6 percent, matching the new requirements, according to Citigroup. Despite this fact, Citi's profit was still up 42 percent from a year ago.
You'd think Citi, of all banks, would want to shout this news from the rooftops. The bank is just five years removed from a near death experience during the financial crisis. It has a new CEO, Michael Corbat, who seems to have done a decent job of resuscitating the once dying giant after the stormy tenure of recently ousted CEO Vikram Pandit.
And yet Citi and the other big banks have to keep this sort of thing on the down-low. They are the new Big Oil or Big Tobacco. Making too much money draws too much unwanted attention. If they can handle the rules that have been put in place so far with hardly a hiccup, maybe they can handle even higher capital requirements and new regulations on derivatives and trading. That might be bad for business. But I am quite sure that the CEO's of these banks will not starve, and their profits will continue soar.