By Pam Martens and Russ Martens and cross-posted from Wall Street on Parade
The two greatest periods of wealth inequality in the United States (the 1920s and today) have one critical element in common – there was no Glass-Steagall Act. The absence of the Glass-Steagall Act allows Wall Street banks to use the savings of small depositors across the United States to fuel risky speculation on Wall Street and create the super rich. After the Wall Street crash of 1929 and the onset of the Great Depression, the Glass-Steagall Act became law and put an end to this institutionalized wealth transfer system from the legislation’s enactment in 1933 until its repeal in 1999 under the Presidency of Bill Clinton.
Today’s banking system is a perfect reflection of U.S. society. Just six banks (one-tenth of one percent of the 6,000 insured-depository banks in the U.S.) control the bulk of total assets while, as Senator Bernie Sanders regularly reminds his audiences, in American society “the top one-tenth of one percent owns almost as much wealth as the bottom 90 percent.”
Until the public wakes up to the reality that banking concentration is producing the wealth concentration and restores the Glass-Steagall Act, poverty, despair and the unraveling of social order will continue apace while another epic financial crash hovers just over the horizon.
You don’t have to take our word for it. The U.S. Treasury’s Office of Financial Researchproduced a study in March of this year that made two critical findings. First, that “credit derivatives exposures were at the core of the 2008-09 financial crisis.” Second, the study found that just six banks constitute “the core” of the U.S. financial system.
According to a March 31, 2016 report from the Federal Reserve, of the six mega Wall Street banks that make up the core of the U.S. financial system, just four of those banks (JPMorgan Chase, Wells Fargo, Bank of America and Citibank) hold $6.7 trillion in assets out of the $15.9 trillion total held by the other 6,000 commercial banks, or 42 percent of the total.
When it comes to derivatives, however, the concentration is exponentially worse. According to the 2016 first quarter report from the Office of the Comptroller of the Currency released last month, all bank holding companies in the U.S. hold $250 trillion in notional (face amount) of derivatives. But just five mega Wall Street banks (Citigroup, JPMorgan Chase, Goldman Sachs, Bank of America and Morgan Stanley) hold $231.4 trillion of the total or a staggering 93 percent of all derivatives in the entire banking universe of the United States.
It can come as no comfort to any rational U.S. citizen that Citigroup, the behemoth that blew itself up in 2008 and received the largest taxpayer bailout in the history of finance ($45 billion in equity infusions, over $300 billion in asset guarantees, and more than $2 trillion cumulatively in secret, below-market-rate loans from the Federal Reserve) is now the largest holder of derivatives with $55.6 trillion notional amount, eclipsing even JPMorgan Chase, the country’s largest bank…