Fourth installment in the series, and one I never expected to write. Well, except maybe for Wachovia.
Morgan Stanley has $1.03 trillion in assets and $997 billion in liabilities. They are counterparty to $10.6 trillion in derivatives trades (page 103, sum of “Beneficiary” and “Guarantor” amounts).
Goldman Sachs has $1.09 trillion in assets and $1.04 trillion in liabilities. They are counterparty to $1.78 trillion in derivatives trades (page 46).
These are the last two of our five investment banks, once known as the “Masters of the Universe”. According to CNBC, Morgan Stanley is about to be purchased by China.
Wachovia is a commercial bank with $796 billion in assets, $619 billion in liabilities, and $378 billion in deposits. So think of it as 2 to 2½ WaMus…
$1.09 trillion in assets and $1.04 trillion in liabilities??
So if i wake up one morning with 5 cents in my pocket
and borrow 1.04 from Joe and lend out 1,09 to Bill
I have nothing in my pocket?
I also have 1.09 in assetts and 1.04 in liabilities?
Yes, that is correct. And after Bill repays you $1.10 ($1.09 loan plus one penny interest) you wind up with six cents, a 20% return on a 1% loan.
Which explains why you might do this.
Of course, if Bill is only able to repay you 90 cents, then the global financial system collapses.
Welcome to 21st century capitalism.
Excellent work (extensive digging and addition) – thank you so much for this and your other posts