For the 1Q 2012, the Total Pretax Income of these 8 US Big Financial Corps was down 9% from the 1Q 2011.
The traditional banks.....Wells Fargo and US Bancorp.....did just fine. All of the others, nearly all of which are very heavy in derivatives, had down earnings from the prior year's quarter.
I do find it interesting that so many people are shouting out so much against JPMorgan Chase and its recent $2 bil loss in derivatives. It is indeed really bad for its shareholders.
But then the US Congress just sat there twiddling its thumbs when Fannie Mae generated Derivative Losses, included as charges on their income statements, in every year from 2002 to 2011, which totaled more than $70 bil, and Freddie Mac generated Derivative Losses, in every year from 2004 to 2011, which totaled more than $50 bil. And this is indeed really bad for all US taxpayers, who are funding Fannie and Freddie's massive losses.
Derivatives are a zero-sum game. Since Fannie and Freddie, year after year since the early 2000s, had Derivative Losses totaling more than $120 bil, the logical $120 bil Derivative Gains winner would be the Financial Industry. Thus what happened here in essence was a massive transfer of wealth from US taxpayers, who fund Fannie and Freddie losses, to the Financial Industry. Thus the true US government bailout to the Financial Industry has been much greater than US citizens realize.
It's pretty clear to me that all derivatives, which are clearly deemed speculative in nature, should be disallowed in the US. If this would have been the case, there would not have been the horrible financial meltdown in the US in 2008, which continues to play havoc on US Unemployment, US Underemployment, US economic growth, and the massive US Deficit. The US Financial Accounting Standards Board has already done an excellent job at defining effective hedge derivatives and speculative derivatives. There is clearly nothing wrong with derivatives that are effective hedges.
This is one of the many reasons the US Congress has such low approval ratings. And it is also the reason the US Congress, which is so devoid of members with savvy financial expertise, needs new members like Massachusetts' US Senate Candidate Elizabeth Warren, whose very strong financial expertise would put her at the very top of the present US Congress.
Below here is the Pretax Income (PTI) of each of these 8 US Big Financial Corps for the 1Q 2012, and as compared with the 1Q 2011.
| Increase | Increase | |||
| PTI | PTI | (Decrease) | (Decrease) | |
| 1Q 2012 | 1Q 2011 | Amount | % | |
| mils $s | mils $s | mils $s | ||
| US Big 8 Financial | ||||
| JPMorgan Chase | 7,641 | 8,057 | (416) | -5% |
| Wells Fargo | 6,648 | 5,386 | 1,262 | 23% |
| Citigroup | 4,068 | 4,216 | (148) | -4% |
| Goldman Sachs | 3,181 | 4,040 | (859) | -21% |
| GE Capital Services | 1,991 | 2,250 | (259) | -12% |
| US Bancorp | 1,832 | 1,395 | 437 | 31% |
| Bank of America | 719 | 2,780 | (2,061) | -74% |
| Morgan Stanley | 203 | 901 | (698) | -77% |
| Total all 8 | 26,283 | 29,025 | (2,742) | -9% |
