Cardboard

It seems like the surging Dow Jones has finally hit a significant rut. Consider the period from 9/08 to 9/09 where it was steady decline followed by the sputtering from QE1 ramping things up a bit. I recall that around this time last year(really 2nd Quarter) it started to drop back, followed by significant stagnation in the economy as a whole heading into last summer. This year has repeated for the most part the same ups and downs, only the months above 12k have been short. As of last Friday the Dow is back under 12k again after spend most of 2011 above that.

Thought it might be a good time, therefore, to eyeball the nations ten largest banks and where their "assets" are at. I use quotations because these assets are really liabilities--that is, on the balance sheets and potentially redeemable, but who knows what they really are. At this point, the paint coloring the bricks on the outside of a banks headquarters could be somehow fixed into a security and collateralized for a quick turn on the repo market. Funny, huh? Yeah, well don't laugh too hard because that is about where it's at. For all intents and purposes our entire financial system is insolvent. These so-called assets couldn't be liquidated or even redeemed because they have already been leveraged against the banks debt. Thus the house of cards gets bigger, but it still couldn't support a single resident. 

 

Largest Banks in U.S.

(in thousands of U.S. dollars)

Rank Institution Headquarters Assets 1. Bank of America Corp. Charlotte, N.C. $2,340,667,014 2. J. P. Morgan Chase & Company New York, N.Y. 2,135,796,000 3. Citigroup New York, N.Y 2,002,213,000 4. Wells Fargo & Company San Francisco, C.A. 1,223,630,000 5. Goldman Sachs Group, Inc. New York, N.Y. 880,677,000 6. Morgan Stanley New York, N.Y. 819,719,000 7. Metlife, Inc. New York, N.Y. 565,566,452 8. Barclays Group US, Inc. Wilmington, Del. 427,837,000 9. Taunus Corporation New York, N.Y. 364,079,000 10. HSBC North America Inc. New York, N.Y 345,382,871

As of Mar. 31, 2010.

Source: Federal Reserve System, National Information Center.

Read more: The Top Ten: Largest Banks in U.S. — Infoplease.com http://www.infoplease.com/toptens/usbanks.html#ixzz1P6xCUXuP

Check out a website called RepoWatch and read up on the repurchase market--the "shadow banking system" that everyone has been talking about. You might walk away a little disillusioned, but better educated as well. After all, if you're on a boat in the middle of the ocean heading for a storm, you want to know what the hull is made of right? Sorry to be the guy who whispers "cardboard" in your ear.