Monday, October 20, 2014


With the 85th anniversary of "Black Tuesday" and "Black Thursday" (1929) around the corner, many of you will find the 3 charts below interesting, and a bit disturbing ...

Bank clients crowd around, hoping to get their money out of the bank, 1929.

Over the years I've posted many times on the 2008 market collapse, the subsequent bailouts, and what they mean for the American economy. Remember this "the banks are really bankrupt" chart from Bloomberg View?

CHART #1: Bank profits collapse without government agency sponsored subsidies.

I originally posted Chart #1 over a year and a half ago as a part of a larger story to help illustrate how much our nation's biggest banks depend on taxpayer subsidized bailouts, credits, and other guarantees. Drawing from an International Monetary Fund (IMF) sponsored report, Bloomberg View put together some pretty scary numbers that tell us our nation's biggest banks would be virtually bankrupt without financial support from agencies sponsored by the federal government (specifically, the Federal Reserve and Treasury).

To repeat, our nation's biggest banks are probably bankrupt, but our trillion dollar subsidy and bailout programs keep them afloat.

Are you with me so far? Good, because it gets worse the closer we look. Check out this chart from Zero Hedge.

CHART #2: Bank of America spends almost $30 billion defending their practices.

This chart tells us what Bank of America has been spending on litigation since 2011. It adds up to almost $30 billion dollars.

Worse, as Zero Hedge points out, these litigation expenditures are not "one-time" or "non-recurring" expenses. They are regular and recurring cash outlays that are used to defend or pay off criminal activities that are "now an ordinary course of business" for Bank of America.

How does $30 billion in litigation costs stack up to Bank of America's net income between 2011 and 2014? Zero Hedge has an easy to read chart that explains it all. And it's not pretty.

CHART #3: Bank of America spends more defending itself than it has earned since (Q4) 2011. 

In a few words, between 2011 and 2014, Bank of America has spent more defending its criminal or incompetent practices in court than it has made during this period (in the FYI category, BofA has been doing stuff like this for some time now).

For those of you keeping score at home, this is what we have.

America's biggest banks are effectively bankrupt without federal subsidies (Chart #1).

Bank of America is spending billions of dollars defending criminal activities in court (Chart #2).

Bank of America has spent more money defending itself in court than they earned over the past 3 years (Chart #3).

I really can't add much more to this.

- Mark

ADDENDUM: For those of you looking for a great chart that ties federal assistance to market performance (and market declines) check out the chart in this post. We are living on borrowed time.

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