CNN reports a S&P Global Ratings estimate of $2.1 trillion in credit losses due to the pandemic and says the five largest US banks have set aside $35 billion against loans expected to go bust.

That is not much of a cushion for the loans of our five largest banks. Unless rules have changed and I am mistaken, bank reserves are an offset to profits. If the five banks expect $35 billion in profits and put that amount in reserves, they have no profits to report and no taxes to pay. Later when they need a stock price boost, they can stop adding to reserves, and their earnings will show a big jump. 

There is another interesting point in the CNN report that went unnoticed. Because of various scandals and penalties, Wells Fargo is currently prevented from growing its balance sheet.  In other words a hold has been put on its size and the bank is prohibited from acquiring more assets to offset its losses. Could the Federal Reserve be setting up Wells Fargo for a takeover by one of the New York Banks?  A bank that can’t grow its balance sheet is not in a good position to remain independent.

In my youth US economic policy focused on preventing concentration of economic activity.  No more.  Concentration is the new normal. In the US the five largest banks have about half of total bank assets. Media ownership is concentrated in 6 corporations. Big Box chains have taken over from independent businesses.  Amazon is an online retail monopoly. Google, Facebook, and Twitter are essentially monopolies. 

We have gone from monopoly is bad to monopoly is good.  Anti-trust, once an area of economic study, seems to have disappeared from the curriculum and from federal regulation.

 Author

Paul Craig Roberts has held academic positions at Virginia Tech, Tulane University, Stanford, George Mason University, and Georgetown among others,  practiced journalism as editor and columnist for The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service and authored numerous books on international policy and economics,  served as Assistant Secretary of the Treasury for Economic Policy and as a consultant to the U.S. Department of Defense and the U.S. Department of Commerce.  In business, he served as advisor to J.P. Morgan asset management, to Tiedemann-Goodnow, to Lazard Freres Asset Management and as an executive and a member of corporate and financial boards. He is chairman of The Institute for Political Economy. He brings his considerable experience and acute insight to one of the most widely read and influential columns in alternative media, https://www.paulcraigroberts.org, which we recommend you visit.  - Ed.