Goldman Sachs’ Rich Man’s Bank Backstopped by You and Me, by Pam Martens and Russ Martens

One simple but very powerful fact has not changed at all since the last financial crisis: the government is on the hook for the banking industry’s liabilities. Note the staggering derivatives exposures in the following graph. Bankers say that these are gross, not net exposures. In other words, banks often match the sale of a derivative with the purchase of the same derivative, giving them a net exposure of zero until…until a counterparty goes bust, like AIG or Lehman Brothers did during that last crises. From Pam Martens and Russ Martens at wallstreetonparade.com:

OCC List of Banks by Assets Versus Notional Amounts of Derivatives, June 30, 2015

Just when you thought Wall Street’s heist of the U.S. financial system couldn’t get any crazier, along comes a regulator’s report on FDIC-insured banks exposure to derivatives. According to the Office of the Comptroller of the Currency (OCC), one of the regulators of national banks, as of June 30 of this year, Goldman Sachs Bank USA had $78 billion in deposits, and – wait for it – $45.7 trillion in notional amount of derivatives. (Notional means face amount of derivatives.) According to the OCC report, Goldman Sachs Bank USA’s notional derivatives are an eye-popping 563 percent of its risk-based capital. You and every other little guy in America are backstopping this bank because it’s, amazingly, FDIC insured.

Compared to its Wall Street peers, Goldman Sachs Bank USA is a midget. JPMorgan Chase Bank NA has just shy of $2 trillion in assets; Citibank NA (part of Citigroup) has $1.3 trillion; Bank of America NA $1.6 trillion. That compares with Goldman Sachs Bank USA, which just became an FDIC insured bank at the height of the financial crisis on November 28, 2008, which has a puny $122.68 billion in assets. But it wants to play with the big boys anyway when it comes to derivatives, as the chart above shows.

Based on the data, it looks like the average taxpayer is backstopping a ton of risk at this FDIC insured bank and getting very little in return. According to financial data from the FFIEC for the second quarter, the bank had $25.1 billion in trading assets and according to the company’s web site, it’s those high net worth clients of its Private Bank that it’s working with “to manage their cash flow needs, finance private asset purchases, and facilitate strategic investments.”

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