Richard Salsman for Forbes here savages the thieving, incompetent US Federal Reserve for its utter hypocrisy in keeping comparatively well-capitalized big banks from paying out dividends when its own balance sheet is the most under-capitalized of all and pays out 100% of what it makes.
Not news, but it bears repeating as often as possible, especially when it's stated so well:
'[I]n the century prior to the Fed’s founding in 1913, U.S. commercial banks were far more liquid and far better capitalized; in the century since 1913, however, and especially since the FDIC was established in 1934, the banks’ liquidity and capital adequacy measures have steadily deteriorated. This artificial, policy-induced financial precariousness has been used routinely as a pretext to justify onerous regulations – which, it’s easy to notice, have never quite adequately curbed all the excessive risk-taking and hence periodic banking crises. Bank executives often oppose the onerous regulations, but not the government subsidies which invite them. ...
'What about the Fed? It’s now got the biggest balance sheet of all the major banks in the U.S. – $3.1 trillion in total assets (versus $2.2 trillion at Bank of America, the largest private-sector bank in the U.S.) – and yet the Fed also has only $55.1 billion in capital (versus $160.3 billion at Bank of America). That means the Fed’s capital/assets ratio is a mere 1.8%, less than a quarter of the average capital ratio for the top eighteen banks subject to CCAR (8.0%) and of the three banks recently deemed inadequate (8.2%). The Fed’s capital ratio is only 15% of the ratio of BB&T (11.5%), the most-capitalized of the top private banks. Moreover, the Fed’s dividend payout ratio is hardly conservative or capital-preserving (like 10-33%); it is a 100% payout, since the Fed pays all its income (mainly from Treasury bonds, notes and bills), none of which is taxed, straight to the Treasury. Whereas the Fed is leveraged 56:1 (liabilities/capital), the top eighteen banks are leveraged by just 12:1 (average), while the three censured banks are leveraged by only 10:1 (average). ...
'This is the same Fed which, over the past century, has debased the dollar to such a degree that it’s now worth only 5% of its initial real purchasing power in 1913 (whereas the dollar in 1913 was approximately as valuable as it was in 1813, because it was anchored by the gold standard, not by a flimsy Fed standard). This is the same Fed that Alan Greenspan touted in a 1996 speech as “the ultimate guardian of the purchasing power of our money.” Is it truly a “guardian” – or instead an incompetent, or perhaps a thief – who presides over a loss of 95%? This is the same Fed which now censures private banks for having capital levels many times greater than the Fed’s own capital level. Isn’t it high time we ended the hypocrisy whereby the politically-financially reckless among us rule the day?'
The big banks' off-balance-sheet assets make their capital ratios much worse than stated above, but that just makes them more like the Fed in that respect. Salsman points out that before 1913 when we still had true, private banking, capital ratios averaged 20%+, whereas today 8% is about as good as it gets.
