Wall Street's Six Big Banks Earn $1 Trillion Profit in a Decade - America’s Financial Makeover
The Executive Headlines
For the first time ever, the six banking giants of US banking will see a trillion decade, and it's not the revenue, it's pure profit. These six banks are JP Morgan, Bank of America, Citigroup, Wells Fargo & Co., Goldman Sachs, and others.
Wall Street which has been the official flag bearer of wealth in the U.S. was given a setback when these banking giants came up and were raring to score such a massive profit.
It is said that Wall Street was the major source behind the financial crisis in America and didn’t want banking organizations to lead the wealth spectrum of the country.
Why was Wall Street A Target of the Global Protest Movement?
Before the decade began, Wall Street was the target of a global protest movement, and politicians on both sides of the political spectrum were fuming over bailouts or attempting to break up too-big-to-fail lenders.
While most of the world's attention was focused on the wealth generated by Silicon Valley, banks were gathering steam. Volatility boosted Wall Street's trading hauls, investment bankers decided to ride a dealmaking boom, and then US President Donald Trump boosted bottom lines by lowering taxes. Likewise, there are multiple reactions to the milestone across the industry.
It is not just the profit scale that is so astonishing, though there is much more than this like the industry’s capability to push through scams and thrive anew.
Paying for Scandals
Banks had to pay in order to escape the shadow of the global crisis. In 2014, Bank of America agreed to a US$16.7 billion settlement to end investigations into shoddy mortgage practices, surpassing JPMorgan's US$13 billion. By then, some banks had discovered new sources of profit, which had landed them in hot water.
Employees at Wells Fargo, under pressure to meet sales targets, opened millions of accounts for customers who had not requested them, the most well-known of a series of scandals that eventually spanned the majority of the company's businesses.
In Malaysia, Goldman Sachs finished raising billions of dollars in 2013 for the 1Malaysia Development Berhad, a state-owned investment fund that was then stolen by a group led by a former prime minister.
That year saw a new level of fervor on Wall Street. Banks that made less than US $70 billion in 2017 made more than US 120 billion in 2018 as a result of tax cuts, an increase in interest rates, and increases in retail banking and dealmaking.
The period was a wild ride for bankers. Personnel costs for the six companies, which had been hovering around US $148 billion at the start of the decade before dropping for a few years, jumped to US $154 billion in 2019, despite the fact that their overall employee count had actually decreased.
Mr. Jamie Dimon, JPMorgan's already-billionaire CEO, would eventually receive such a large pay package that a proxy advisory firm advised shareholders to vote against it.
Analysts were attempting to write obituaries for Wall Street's run of record profits in early 2020. Instead, banks aided in the proliferation of blank-check businesses known as special-purpose acquisition companies. Later, when regulators became concerned and prices began to fall, investors were left holding the bag.
Profits in 2021 were also boosted by an accounting move: banks felt confident enough in the economy, thanks to government interference, to unleash some of the reserves they had reserved in case loans went bad. The Big Six made more money in 2021 than in 2013 and 2014. Even when Russia attacked Ukraine this year, the turmoil aided traders in defying expectations of hard times.
Even after accounting for inflation and large bank amalgamations during the financial crisis, profits over the last ten years have surpassed those of the previous decade.
Others, particularly in Silicon Valley, have done far too well for Wall Street to claim a monopoly on success. Apple alone earned more than $500 billion. JPMorgan was beaten by Microsoft, Berkshire Hathaway, and Alphabet, with Exxon Mobil edging out Bank of America and Wells Fargo.
Banks would credit some of their gains to innovation after investing in tech platforms and improving offerings such as credit card rewards. They have also assisted companies in accessing capital markets in order to grow the economy, and they have retained some of the profit, contributing more than US $200 billion to their capital buffers in the past decade to reduce the likelihood of a repeat of 2008.
Furthermore, it was another government involvement that kept the economy afloat during the pandemic, paving the way for those record profits.
Some banks have concentrated their efforts on a narrower set of customers, limiting opportunities for many communities, and have been slow to pass on rate increases to savers, betting that customers will not flee to smaller competitors.
How does the Market Move from Here?
Critics would counter that this achievement of gaining $ 1 Trillion is not just the credit of banks alone. Many banks would have not been able to cope if it weren’t for taxpayer aid, and those buffers resulted from strict capital rules, sometimes ratified over bankers’ objections.
Without the intervention of the government, any financial reform is next to impossible. Critics also say the fortunes of banks also depend on the health of clients. If the clients are growing slowly or at a fast pace, the bank would take no time to make massive profits.
These six banking giants are extremely capable of doing unbelievable things as they are the strongest pillars of the financial system of America. They can make the country proud of being a developed nation always.