Thursday, May 24, 2012

Bank Profits back to 2007 levels, lending down to 1984 levels

Bank profits now back to 2007 bubble-year levels, despite the grinding economy.  Well, not really despite of it, in fact, banks are helping cause it!  For, you see, banks are not lending money into the economy. 

Total lending is down to levels last seen in 1984!  As the WSJ puts it: "Net loans equaled just 70% of total deposits in the first quarter, according to the Federal Deposit Insurance Corp.'s quarterly banking profile released Thursday. That is the lowest level since 1984."

This quarter's numbers also provide a window into the obscene banking profitability model:  for every dollar they lend out, they gain 62 cents in profit.    Not a bad racket, eh?  That is like a 62% interest rate earned on every loan!    Earned, not charged, as it is earnings, pure profit.  Obviously, they must be charging a much higher rate, to cover all their costs.    That, my friends, is the magic of compound interest!  Ha    Plus various and sundry charges and fees, of course. 

The math is pretty straight forward.  Total profit: $35.3 billion.  Total lending: $56.3 billion.   For every $1.00 they lent out, they gained $0.62 in profit.   Good time to be a banker.,0,3994281.story

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