[Sources: FDIC, Comptroller of the Currency, ISDA, BIS]
U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S. commercial banks had $88.3 trillion in derivatives at the end of 2004, up from $71.4 trillion at the end of 2003. Total assets of the banking system rose 11% in 2004, to $8.4 trillion from $7.6 trillion, while loans rose 11% to $4.9 trillion from $4.4 trillion. Equity capital rose 23% to $850 billion from $692 billion. Three banks dominated in terms of assets and derivatives: JP Morgan Chase had $1.2 trillion in assets and $45 trillion in derivatives; Citigroup had $1.5 trillion in assets and $19 trillion in derivatives, and Bank of America had $1.1 trillion in assets and $18 trillion in derivatives.
Globally, there were $165 trillion in interest rate and currency derivatives outstanding as of mid-2004, plus another $6.4 trillion in credit derivatives and $3.8 trillion in equity derivatives, according to the International Swaps and Derivatives Association. During the last half of 2004, the level of credit derivatives soared 55%, to $8.4 trillion, topping their 44% growth in the first half. Since credit derivatives are sold as insurance against default on bonds and other instruments, this growth reflects increasing instability and desperation in the markets, and a mad rush to paper over losses.
The Bank for International Settlements put the global derivatives market at $221 trillion as of mid-2004.
While EIR believes the level of derivatives reported by these agencies falls far short of the actual size of this casino, we have no basis for calculating our own numbers. However, if one were to assume a 25% annual growth rate, the $300 trillion in derivatives (out of $400 trillion in financial aggregates) LaRouche estimated in 2000, would have grown to $730 trillion in 2004 and $915 trillion—nearly $1 quadrillion—in 2005. The U.S. bank numbers are cumulative totals, whereas the BIS and ISDA numbers are adjusted to eliminate double counting on deals between derivatives dealers, essentially cutting them in half. Whatever the actual level of derivatives is, it is way beyond the pale.
