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Another Dangerous Virus Hits the U.S. – Wall Street Bank Contagion

Courtesy of Pam Martens

S&P 500 Index Versus Morgan Stanley, Goldman Sachs, Bank of America, JPMorgan Chase and Citigroup, Feb 1 through March 11, 2020

S&P 500 Index Versus Morgan Stanley, Goldman Sachs, Bank of America, JPMorgan Chase and Citigroup, Feb 1 through March 11, 2020

By Pam Martens and Russ Martens

There has been a lot of delusional talk about the strong capital levels of the mega banks on Wall Street, not only from the Federal Reserve, but also from Wall Street analysts spreading fantasies about the banks on cable news programs. We took an afternoon off last Friday to hear what was being said about the banks on CNBC.

We were stunned to hear Mike Mayo, a long-tenured bank analyst on Wall Street, who currently works for Wells Fargo Securities, deliver a huckster-like assessment of the mega Wall Street banks. Mayo said this:

“The banking industry has the strongest balance sheet in a generation. Now think about this: the banks have added $1 trillion of additional capital – that’s $1 trillion with a T; $2 trillion of additional cash; $3 trillion of additional deposits. You have a Federal Reserve stress test every year. Every year, the Federal Reserve, the overseer of the banking industry, they assume Armageddon will happen.”

Mayo forgets to mention this: the big banks have been bleeding common equity capital since this selloff began. Since the first trading day of this year, January 2, JPMorgan Chase has lost $138.27 billion of its common equity capital, a decline of 32 percent. The carnage at Citigroup has been even worse with its common equity capital tanking by 37.5 percent, more than a third. See the chart above for the contagion effect among the other mega banks on Wall Street.


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