Six Big Banks Forced to Declare $9.3 Billion in Additional FDIC Expenses; Another Reason Their Talons Are Out for FDIC Chair Gruenberg

[Gunnar Larson]

https://wallstreetonparade.com/2023/11/six-big-banks-forced-to-declare-9-3-billion-in-additional-fdic-expenses-another-reason-their-talons-are-out-for-fdic-chair-gruenberg/


By Pam Martens and Russ Martens: November 22, 2023 ~

Bank Logos (Thumbnail)The biggest banks in the U.S. that have been serially
bailed out by the Federal Reserve since they blew up the financial system
in 2008, are ripping mad at the Chairman of the Federal Deposit Insurance
Corporation (FDIC), Martin Gruenberg.

In addition to the FDIC and other federal banking regulators’ proposed rule
to increase capital requirements on the largest banks, the FDIC just issued
a final rule on November 16 that will force six banks to report an FDIC
special assessment expense totaling more than $9.3 billion in the final
quarter of this year. (See chart above.)

Jamie Dimon, Chairman and CEO of JPMorgan Chase, is hair-on-fire mad
because his bank is getting hit with the whopping figure of approximately
$3 billion according to the firm’s most recent quarterly filing (10-Q) with
the SEC.

The most recent 10-Q filings with the SEC for the other five banks estimate
their FDIC special assessments as follows: $1.9 billion at Bank of America;
$1.8 billion at Wells Fargo; $1.5 billion at Citigroup’s Citibank; $650
million at U.S. Bancorp; and $460 million at Truist.

The FDIC’s special assessment results from the failure of Silicon Valley
Bank and Signature Bank in March, where banking regulators made a Systemic
Risk Determination to cover uninsured deposits at the two banks to stem a
spreading banking panic. The FDIC’s Deposit Insurance Fund that protects
depositors at the nation’s commercial banks and savings associations
experienced a related loss of $16.3 billion attributable to the protection
of uninsured depositors. The FDIC’s governing law allows it to impose this
special assessment on insured depository institutions to make up for the
losses.

What the big banks don’t like is that they are picking up the lion’s share
of the losses. The FDIC argues that large amounts of uninsured deposits
inherently make the banking system less safe and the banks that had the
largest amounts of uninsured deposits as of December 31, 2022 must pay the
piper for their imprudent concern for safety and soundness. (See our
report: International Bank Study, Using 150 Years of Data, Shows Mega Banks
Like the Big Four in the U.S. Produce Financial Instability and More Severe
Crises.)

Out of the approximate 4,100 federally-insured commercial banks in the
U.S., the FDIC estimates that only 114 banks will be subject to the special
assessment. That’s because the vast majority of banks in the U.S. honor the
concept of being a federally-insured bank and keep the bulk of their
deposits under the FDIC insurance cap of $250,000 per depositor, per bank.
(See our report: At Year End, 4,127 U.S. Banks Held $7.7 Trillion in
Uninsured Deposits; JPMorgan Chase, BofA, Wells Fargo and Citi Accounted
for 43 Percent of That.)

The figures presented in the chart above may actually underestimate the
final dollar figures that will be paid by the banks. When the banks
published those estimates in their 10-Qs, the FDIC had estimated the losses
to the Deposit Insurance Fund at $15.8 billion from covering uninsured
deposits at the two banks. As of November 16 when the final rule was
passed, those losses had grown to $16.3 billion according to the FDIC.

Another thing that has riled up the mega banks on Wall Street and have them
whispering in the ears of their captured members of Congress to sack FDIC
Chair Gruenberg, is that the FDIC dismissed out of hand their 12-page
letter of objections to the methodology of the special assessment. (What
good is paying millions of dollars to lobby if you don’t get what you paid
for?)

The letter was sent by the Bank Policy Institute, whose Board of Directors
is Chaired by none other than Jamie Dimon and includes the CEOs of the
biggest banks in the U.S.

For how the big banks are lobbying on the still-in-the-works capital rule,
see our report: Meet the Banking Cartel that Is Planting the Seeds for the
Next Banking Panic and Bailout.

As a prime example of just how casino-like the U.S. banking system has
become, Goldman Sachs, the “great vampire squid,” is allowed to own a
federally-insured bank. (In October 2020, the vampire squid was criminally
charged by the Justice Department for looting the Malaysian sovereign
wealth fund, 1MDB in a grand bribery conspiracy.)

Goldman Sachs owns the federally-insured Goldman Sachs Banks USA, which is
currently ranked by the Federal Reserve as the 7th largest
federally-insured bank in the United States. Never mind that Goldman Sachs
is also running an octopus of an international Dark Pool trading operation
and has $57 trillion (yes, trillion) in opaque derivatives while its CEO,
David Solomon, moonlights as a DJ. (You can’t make this stuff up.)

Goldman Sachs was peculiarly silent in its most recent 10-Q filing on how
much its bank expects to pay for its share of the FDIC’s special
assessment. But its 10-Q filing for the second quarter of this year
estimated its tab at “$400 million (pre-tax).”

PNC Bank’s publicly traded parent has also previously reported to the SEC
that it estimates that its special assessment expense, to be taken in full
in the fourth quarter, will be approximately $370 million after-tax.
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