Brittle Banks: Basic Blunders
December 17th, 2016
How are our brittle banks doing? By the 2015 numbers Chase, Wells Fargo, and Citi Bank had a total of $513.5 billion cash to cover $3.4 trillion of deposits. This cash amount includes deposits with other banks, but not “cash equivalents.” The 15% of cash on hand is slightly higher than expected but still paints an interesting picture.
Wells Fargo had $20 billion cash to cover $1.2 trillion in deposits (1.7%) until you count their “cash equivalents” of $270 billion. They did bring in $86 billion in revenue from this complex structure, but they also ended the year with a whopping $199.5 billion in long term debt. Citi and Chase ended with $200 billion and $288 billion in long term debt respectively.
Imagine that scenario “Hey broke bank, we’re broke can we borrow a few billion?” “Sure broke bank, as long as we can borrow a few billion to cover it.”
At Savvy, Inc. we don’t just pick apart financial statements to make light of serious situations. We offer solutions and strategies.
Don’t go out and withdraw all your money. That’s a bad idea. Runs on banks are a precursor to major recessions. During a major recession hyper inflation can render large sums of money useless. These institutions have been dubbed “too big to fail” for a reason. In a major economic event it is likely large banks would receive more bailout money from the government. But keeping a bank afloat really does not help one find a job or pay the bills.
One thing everyone outside of upper leadership can do is ask for a raise. Consumer spending fuels the economy. Wells Fargo CEO John Stumpf made $19.5 million in 2015 for his dismal performance (before resigning in disgrace)… so there is plenty to go around.
For help with your specific scenario please reach out to us.