Just reviewed the 2rd qtr. OCC Derivative Report (I know…a little late).
By Daniel at 2 November, 2009, 8:58 am
The 5 largest holders of derivatives (commercial banks) hold 97% of the notional amount of derivatives. Those commercial banks are JP Morgan (JPM), Goldman Sachs (GS), Bank of America (BAC), Citi (C) and Wells Fargo (WFC). The table below shows the total amounts of assets (in $billions), total amount of derivatives (in $billions), the percentage increase/decrease in assets from the previous quarter, the percentage increase/decrease in derivatives from the previous quarter, and the ratio of assets to derivatives holdings (A/D Ratio).
…………..Assets………..Derivatives..…Assets inc/dec …Deriv. inc/dec… A/D ratio
GS……..$119.678………$40,477.262………-25.9%…………..+1.4%……………..0.3%
JPM…$1,663.998……..$71,941.219………-1.4%…………….-1.5%……………..2.1%
C……..$1,165.400………$31,943.721……..+1.9%……………+7.8%……………..3.6%
BAC…$1,450.830………$39,064.884……..+1.2%……………+2.6%……………..3.7%
WFC..$1,100.177………$5,111.215……….+110%…………..+173%…………..21.5%
Not sure, but I assume WFC purchased another company in the 2nd quarter to have a jump in assets like that. Note the increase/decrease in assets, derivatives and the ratio of assets to derivatives. Generally, if assets increase, so do derivatives - if assets decline, so do derivative - with one exception. Goldman’s assets DECLINED by almost 26% but derivatives INCREASED by 1.4%. Note also the extremely low ratio of assets to derivatives. It would seem this should set off alarms with the regulators. Where are the regulators?
Now, the interesting part - all of the “commercial banks” above are part of a larger holding company. When you strip out the assets of the commercial banking operations, the remaining assets of the holding company are uniformly lower than the assets in their respective commercial banking operations….with the exception of one – Goldman Sachs. JPM for example has $1,663.998 ($billions) in assets in their commercial banking operation with the remaining components of the holding company having assets of $391.024. Below are the figures for Goldman Sachs the holding company, excluding commercial banking operations, showing quarter-over-quarter increases/decreases.
…………..Assets………..Derivatives..…Assets inc/dec …Deriv. inc/dec…A/D Ratio
GS……..$764.532………..$7,821.613…………0.8%…………….-6.5%……………..10.5%
While the commercial banking operations of Goldman are showing a significant decrease in assets with an increase in derivatives, the holding company did the opposite. Assets increased while derivatives decreased.
Conclusion….Goldman is taking on more and more risk through their commercial banking operations while reducing exposure at their holding company. Where are the regulators? The ratio of assets to derivatives is just 0.3%! Note also the relatively huge decline in assets at their commercial banking operations (-25.9%). Is Goldman setting up their “commercial bank” for another bailout while at the same time reducing risk at their much larger parent holding company to protect the holding company?
Hello….regulators…..is there anybody out there?
- Vics
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