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Wall Streeet Banks Going Nowhere But Down

Jan. 15, 2015 (EIRNS)—Most of the big Wall Street banks have reported their fourth-quarter earnings and profits by now, and it’s clear the "oil weapon" has struck them—although most of it is yet to come.

Some of the big six reported increased profits (the "bottom line"), and some had "legal" excuses for reduced profits, in that they had paid large, tax-deductible regulatory fines to make their speculative crimes go away.

But all of them reported reduced, and in some cases, sharply reduced, earnings (the much bigger "top line"). They were "led" in this regard by Bank of America, whose revenue fell by $2 billion or 10%, and Citigroup, whose revenue fell by $1.7 billion or 9%. Across the banks, it was their "trading revenue" which collapsed in the fourth quarter (Citi: down 16%; Bank of America: down 18%). This means revenue from those securities and derivatives operations which, as "commercial banks", they couldn’t have their divisions doing under a restored Glass-Steagall Act.

It should be recalled that one estimate has been published, that the big banks may lose $1.6 trillion in revenue in 2015 due to the plunge in oil/gas prices and energy-sector economic activity.

This is only the start of the problem, as financial expert Pam Martens wrote in her Jan. 14 column, "The Perfect Storm for Wall Street Banks." She added, "Another valid point is that visibility into the big banks exposure as counterparties to derivatives tied to plunging oil and commodity prices and shaky emerging market debt is also being kept under wraps—at least for now. The only clue as to which banks may take a hit, either from direct exposure or from loans to hedge funds taking a bath in the sectors, is the price action of the bank shares in the open market."

During the first half of 2015 the oil price will either go rapidly back up, or these banks will rapidly go down.