Six US banks held assets equal to 61.61 percent of US GDP by 2008

Evidence

By the third quarter of 2008, the height of the crisis, the top six US banks, Goldman Sachs, JP Morgan, Bank of America, Morgan Stanley, Citigroup, and Wells Fargo, had a collective asset-to-GDP ratio of 61.61 percent. They ran leverage ratios (assets/equity) as high as 27 to 1 (Morgan Stanley) and as low as 10 to 1 (Bank of America). Compare this to Lehman Brothers’ footprint. Lehman was running 31 to 1 leverage on an asset base of $503.54 billion, which is equivalent to about 3.5 percent of US GDP. If that wasn’t enough to send the US government running to the tool shed to stop the contagion from spreading through the CDS and repo markets, the possibility of adding just over 60 percent of GDP to the bonfire, the collective total of the banks’ asset footprints, would certainly focus the collective mind on the too big to fail problem. — Mark Blyth, Austerity, 144

Categorization

• SHARE: The specific asset-to-GDP and leverage figures would be worth sending to anyone who works in finance or political economy.
• XREF: connects to: The 2008 crisis boosted BRIC prestige while US GDP shrank — Vincent Bevins, If We Burn: The Mass Protest Decade and…, 166