A Lesson in the Credit Crunch (This Goes Out to You, Jeffrey Lacker)
How convenient that I stumbled across this recent Washington's Blog post on TBTF lending just days after sneering disgustedly at Richmond Fed President Jeffrey Lacker's comments last Friday about seeing "no evidence" of a credit crunch. Oh my dear dear favorite Fedhead, have they gotten to you too? Fuck! You were our only hope, remember?!
Pay attention, JL, this one is just for you because I still love you even if you've lost a couple squishy pink hearts of late and am just here to help. But seriously, OPEN YOUR FUCKING EYES. I'll hold your hand if you need me to, let's take a walk through the dangerous world of the common man trying to squeeze a loan out of the big banks, mmmkay? We'll make this easy and stick to a bank you may be familiar with.
WB said in October (a mere 3 months ago, I remind you):
Some very smart people say that the big banks aren't really focusing as much on the lending business as smaller banks.
Specifically since Glass-Steagall was repealed in 1999, the giant banks have made much of their money in trading assets, securities, derivatives and other speculative bets, the banks' own paper and securities, and in other money-making activities which have nothing to do with traditional depository functions.
Jeff, you're a smart guy, right? I don't admire idiots so you must be. Were you a braindead bonehead like your colleague over at the SF Fed (I won't name names *coughJanetYellenyoustupidasshatcough*), I wouldn't even bother with your ass but I have faith in that big macro brain of yours to realize that what you said on Friday was just plain dumb and I'm about to prove why, stick with me here.
(interjection for dear reader: by JDA's estimation, the last time Lacker showed his trademark "large low-hanging pair" as we like to say was in November of last year. See also my November 17th Jeffrey Lacker Makes Ben Bernanke Look Like a Frightened B*tch in case you need to catch up. It saddens me to report that his balls have been MIA since.)
Now, in a crisis situation (which we are still in despite media reports to the contrary), three months can be a long time, as Washington's Blog reminds us in Less Than a Tenth of Bank Of America's Assets Comes From Traditional Banking Deposits:
I just ran across an example for one of the TBTFs.
Specifically, Bank of America - the U.S. largest bank - has only $83 billion in deposit accounts (what they call "transaction accounts").
But B of A has between $1.3 and $1.5 trillion in total bulk assets and liabilities.
In other words, far less than a tenth of B of A's overall assets come from traditional banking functions.
Why do we need to save the too big to fails again?
Wait a second. $83 billion in transaction deposits but nearly $77 TRILLION (yes with a T) in notional derivatives exposure according to the last OCC report I looked at in July of 2009?
Obviously exposure does not equal assets so looking at Bank of America's "big picture", suddenly those stupid ass commercials with the falling numbers seem even stupider than the first 500 times I saw them.
With me now, JL? These are your people, surely this makes it clear?
If not, don't trip, I've got another example up my sleeve that will really pound the issue home, you just hang tight over there and get comfortable because the proverbial shit will hit the fan when you see this one. The sad part is that it's been directly in front of your pretty little face all this time.
Oh well. Guess that's why I'm here. Dude, I'm not even an economist and it's painfully clear to me, what's keeping you from seeing it?!