CASINO CAPITALISM: Goldman Sachs’ Rich Man’s Bank Backstopped by You and Me – By Pam Martens and Russ Martens

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– 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 is 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.”

According to the New York Times, Goldman Sachs private wealth management services require a minimum of $10 million to get in the front door. The same Times article says Goldman was even kicking out its own employees’ accounts if they fell short of $1 million.

Quite a few things come to mind in reading these various regulatory reports. First, almost none of the promises that were made to the public about what was going to happen under Dodd-Frank financial reform is actually happening. The push-out rule was supposed to push these trillions of dollars of risky derivatives out of the insured banking unit to prevent another epic taxpayer bailout. Citigroup, in a sleight of hand in …December, simply legislated that investor protection out of existence…

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