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For Questions contact Jim Boswell-- For Questions contact Jim Boswell-- email: [email protected] email: [email protected] Quanta Analytics Quanta Analytics The Financial Effect On the Banking Industry The Financial Effect On the Banking Industry For Their Misguided Ways For Their Misguided Ways Financial Crisis Accounting Financial Crisis Accounting Part I Part I Banking Industry Losses Banking Industry Losses

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Quanta Analytics. The Financial Effect On the Banking Industry For Their Misguided Ways Financial Crisis Accounting Part I Banking Industry Losses. Introduction to Banking Analysis. - PowerPoint PPT Presentation

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Page 1: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Quanta AnalyticsQuanta Analytics

The Financial Effect On the Banking IndustryThe Financial Effect On the Banking IndustryFor Their Misguided WaysFor Their Misguided Ways

Financial Crisis AccountingFinancial Crisis AccountingPart IPart I

Banking Industry LossesBanking Industry Losses

Page 2: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Introduction to Banking AnalysisIntroduction to Banking Analysis

There are many myths surrounding the “banking industry” as it relates to the current Great There are many myths surrounding the “banking industry” as it relates to the current Great Recession that we are living through. In that regard, the banking analysis provided herein is an Recession that we are living through. In that regard, the banking analysis provided herein is an

attempt to bring clarity and reason to what really has taken place in the banking environment over attempt to bring clarity and reason to what really has taken place in the banking environment over the last several years. the last several years.

As the wise Admiral Hyman Rickover once said: “Sit down before fact with an open mind. Be As the wise Admiral Hyman Rickover once said: “Sit down before fact with an open mind. Be prepared to give up every preconceived notion. Follow humbly wherever and to whatever abyss prepared to give up every preconceived notion. Follow humbly wherever and to whatever abyss Nature leads, or you learn nothing. Don’t push out figures when facts are going in the opposite Nature leads, or you learn nothing. Don’t push out figures when facts are going in the opposite

direction.”direction.”

The facts as displayed in this presentation provides an eighteen-year perspective of the banking The facts as displayed in this presentation provides an eighteen-year perspective of the banking industry between the end of 1992 to the end of 2010. This period was chosen because it reflects industry between the end of 1992 to the end of 2010. This period was chosen because it reflects information that provides a view of the banking industry as it stood (1) at the end of the S&L Crisis information that provides a view of the banking industry as it stood (1) at the end of the S&L Crisis

as things were returning to normal shortly after the problem peak of that particular crisis; (2) a as things were returning to normal shortly after the problem peak of that particular crisis; (2) a long period of what can be viewed as a more normal steady-state period of operations; and (3) long period of what can be viewed as a more normal steady-state period of operations; and (3)

the beginning of the Great Recession as it has peaked and now is starting to show signs of the beginning of the Great Recession as it has peaked and now is starting to show signs of recovery.recovery.

Page 3: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Introduction to Banking AnalysisIntroduction to Banking Analysis

The financial information appearing in this presentation is obtained primarily from the Federal The financial information appearing in this presentation is obtained primarily from the Federal Financial Institution Examination Council (FFIEC) Call Reports and the Office of Thrift Financial Institution Examination Council (FFIEC) Call Reports and the Office of Thrift

Supervision (OTS) Thrift Financial Reports submitted by all FDIC-insured depository institutions. Supervision (OTS) Thrift Financial Reports submitted by all FDIC-insured depository institutions. All data presented reflect the highest level of consolidation (e.g., domestic and foreign All data presented reflect the highest level of consolidation (e.g., domestic and foreign

operations). This information is stored on and retrieved from the FDIC's Research Information operations). This information is stored on and retrieved from the FDIC's Research Information System database. System database.

The analysis herein is the work of a single individual, Jim Boswell.The analysis herein is the work of a single individual, Jim Boswell.

Jim is the Executive Director of Quanta Analytics.Jim is the Executive Director of Quanta Analytics.He has an M.B.A. from the University of Pennsylvania, The Wharton School, He has an M.B.A. from the University of Pennsylvania, The Wharton School,

An M.P.A. from Indiana University, School of Public and Environmental Affairs; and a An M.P.A. from Indiana University, School of Public and Environmental Affairs; and a B.A. in mathematics from Hanover CollegeB.A. in mathematics from Hanover College

Jim is a veteran, who served as a junior officer on a fleet ballistic missile submarineJim is a veteran, who served as a junior officer on a fleet ballistic missile submarineHe worked for PricewaterhouseCoopers LLP for 15 years prior to starting his own “think tank”.He worked for PricewaterhouseCoopers LLP for 15 years prior to starting his own “think tank”.

In 1995 Jim was awarded a Vice-Presidential “Hammer” Award for his work designing the primary In 1995 Jim was awarded a Vice-Presidential “Hammer” Award for his work designing the primary systems used by Ginnie Mae to monitor the risk of their portfolio.systems used by Ginnie Mae to monitor the risk of their portfolio.

Jim was integrally involved in analyzing data and developing solutions throughout the S&L crisis.Jim was integrally involved in analyzing data and developing solutions throughout the S&L crisis.Jim is the author of Crush Depth Alert, subtitled Solutions for Supplying Power to America’s Jim is the author of Crush Depth Alert, subtitled Solutions for Supplying Power to America’s

Distressed Financial SystemsDistressed Financial SystemsAnd he regularly writes opinion pieces for Business InsiderAnd he regularly writes opinion pieces for Business Insider

  

Page 4: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Crisis AccountingCrisis Accounting

Analysis of Banking Industry LossesAnalysis of Banking Industry Losses

Page 5: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Crisis AccountingCrisis Accounting Showing Bank Losses By Looking at Pre-Tax Net Income Showing Bank Losses By Looking at Pre-Tax Net Income

The First ViewThe First View

The following graph shows the pre-tax net income for the banking industry from The following graph shows the pre-tax net income for the banking industry from 2000 through 2010 (with 2010 net income annualized using the first nine 2000 through 2010 (with 2010 net income annualized using the first nine months of the year results).months of the year results).

Using the $210 Billion figure of 2006 as a Reasonable Benchmark for pre-tax Using the $210 Billion figure of 2006 as a Reasonable Benchmark for pre-tax net income that would have otherwise been expected without a crisis—net income that would have otherwise been expected without a crisis—then the bank losses associated with the “Great Financial Crisis” then the bank losses associated with the “Great Financial Crisis” calculate out to be:calculate out to be:

2007 $210 - $150 = $ 60 Billion2007 $210 - $150 = $ 60 Billion

2008 $210 - $ 30 = $ 190 Billion2008 $210 - $ 30 = $ 190 Billion

2009 $210 - $ 30 = $ 190 Billion2009 $210 - $ 30 = $ 190 Billion

2010 $210 - $110 = 2010 $210 - $110 = $ 110 Billion$ 110 Billion

TOTAL BANK LOSSES = $ 550 BillionTOTAL BANK LOSSES = $ 550 Billion

Page 6: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking Industry Pre-Tax Net IncomeBanking Industry Pre-Tax Net Income(2000 – 2010)(2000 – 2010)

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Page 7: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Crisis AccountingCrisis AccountingShowing Bank Losses by Looking at Provision for LossesShowing Bank Losses by Looking at Provision for Losses

The Second ViewThe Second View

The next graph will be used to calculate bank losses by looking at the Provision The next graph will be used to calculate bank losses by looking at the Provision for Losses in the income statement that are accounted for each year.for Losses in the income statement that are accounted for each year.

In this case, using the $30 Billion amount in 2006 as a pre-crisis benchmark for In this case, using the $30 Billion amount in 2006 as a pre-crisis benchmark for Provision for losses, the accounting shows:Provision for losses, the accounting shows:

2007 ($ 70 - $ 30) = $ 40 Billion2007 ($ 70 - $ 30) = $ 40 Billion

2008 ($180 - $30) = $ 150 Billion2008 ($180 - $30) = $ 150 Billion

2009 ($250 - $30) = $ 220 Billion2009 ($250 - $30) = $ 220 Billion

2010 ($170 - $30) = 2010 ($170 - $30) = $ 140 Billion$ 140 Billion

TOTAL BANK LOSSES = $ 550 BillionTOTAL BANK LOSSES = $ 550 Billion

Page 8: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking IndustryBanking IndustryProvision for Losses as Part of Net IncomeProvision for Losses as Part of Net Income

(2000 – 2010)(2000 – 2010)

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Page 9: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Crisis AccountingCrisis AccountingShowing Bank Losses By Looking at Net Chargeoffs and Loan Loss AllowancesShowing Bank Losses By Looking at Net Chargeoffs and Loan Loss Allowances

The Third ViewThe Third View

The next two graphs will show the amount of assets that the banks have already written off the books The next two graphs will show the amount of assets that the banks have already written off the books (net chargeoffs) and the amount that has been subtracted from their current asset balance as (net chargeoffs) and the amount that has been subtracted from their current asset balance as loan loss allowances (LLA) for current Nonperforming Assets (NPAs) still on the books.loan loss allowances (LLA) for current Nonperforming Assets (NPAs) still on the books.

Again, using previous crisis data somewhat as a benchmark, and thus $35 billion as an expected Again, using previous crisis data somewhat as a benchmark, and thus $35 billion as an expected future amount for net chargeoffs you get:future amount for net chargeoffs you get:

2007 ($ 45 - $ 35) = $ 10 Billion in New Unexpected Net Chargeoffs2007 ($ 45 - $ 35) = $ 10 Billion in New Unexpected Net Chargeoffs 2008 ($100 - $ 35) = $ 65 Billion in New Unexpected Net Chargeoffs2008 ($100 - $ 35) = $ 65 Billion in New Unexpected Net Chargeoffs 2009 ($190 - $ 35) = $ 155 Billion in New Unexpected Net Chargeoffs2009 ($190 - $ 35) = $ 155 Billion in New Unexpected Net Chargeoffs 2010 ($190 - $ 35) = 2010 ($190 - $ 35) = $ 155 Billion in New Unexpected Net Chargeoffs$ 155 Billion in New Unexpected Net ChargeoffsTotal New Unexpected Net Chargeoffs = $ 385 Billion already written off the balance sheetTotal New Unexpected Net Chargeoffs = $ 385 Billion already written off the balance sheet

Now if you add to that number the 2010/2006 Change in Loan Loss Allowances (LLA) on the Now if you add to that number the 2010/2006 Change in Loan Loss Allowances (LLA) on the Balance Sheet, then guess what?Balance Sheet, then guess what?

($243 - $ 78) = ($243 - $ 78) = $ 165 Billion$ 165 Billion for future losses associated with current for future losses associated with current NPANPA

TOTAL BANK LOSSES = $ 550 BillionTOTAL BANK LOSSES = $ 550 Billion

Page 10: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Bank Industry History of Loan Net ChargeoffsBank Industry History of Loan Net Chargeoffs(2000 – 2010)(2000 – 2010)

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Page 11: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking IndustryBanking IndustryLoan Loss Allowances on Balance SheetLoan Loss Allowances on Balance Sheet

(2000 – 2010)(2000 – 2010)

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Page 12: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Well, uh, okay…I See What You Are SayingWell, uh, okay…I See What You Are SayingBut Haven’t You Forgotten Something?But Haven’t You Forgotten Something?

What About Future Bank Losses?What About Future Bank Losses?

Now let me answer your very good question in this manner.Now let me answer your very good question in this manner.

Currently, as the next graph will show you, the amount of Bank Assets that are still (1) on the books and Currently, as the next graph will show you, the amount of Bank Assets that are still (1) on the books and (2) non-performing is made up of the following:(2) non-performing is made up of the following:

Non performing assets < 90 days delinquent = $ 125 BillionNon performing assets < 90 days delinquent = $ 125 Billion

Non performing assets > 90 days delinquent = $ 135 BillionNon performing assets > 90 days delinquent = $ 135 Billion

and Non performing assets in the foreclosure process = and Non performing assets in the foreclosure process = $ 250 Billion$ 250 Billion

TOTAL NON PERFORMING BANK ASSETS (NPA) = $ 510 BillionTOTAL NON PERFORMING BANK ASSETS (NPA) = $ 510 Billion

When considering losses associated with these NPA’s you must remember, however, that:When considering losses associated with these NPA’s you must remember, however, that:

(1) As we noted from an earlier graph, the banks have already set aside (and accounted for) $240 (1) As we noted from an earlier graph, the banks have already set aside (and accounted for) $240 Billion worth of losses associated with the NPAs currently on the books;Billion worth of losses associated with the NPAs currently on the books;

(2) Some non performing assets do in fact return to a performing status;(2) Some non performing assets do in fact return to a performing status;

(3) Non performing assets do usually in fact retain some of their value; and(3) Non performing assets do usually in fact retain some of their value; and

(4) The NPA graph shows that we are four years into our crisis and NPA’s are actually declining.(4) The NPA graph shows that we are four years into our crisis and NPA’s are actually declining.

So regardless of how much one wants to be a doomsayer, once you factor in all four of the above, you So regardless of how much one wants to be a doomsayer, once you factor in all four of the above, you can conclude that the worst is over and the Banks have already accounted for most of the losses can conclude that the worst is over and the Banks have already accounted for most of the losses associated with this Great Banking Crisis—both in the past and in the future.associated with this Great Banking Crisis—both in the past and in the future.

Page 13: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Amount of All Banking Industry Non-Performing AssetsAmount of All Banking Industry Non-Performing Assets30 – 90 days , > 90 days, & in Foreclosure or Nonaccruing30 – 90 days , > 90 days, & in Foreclosure or Nonaccruing

(2000 – 2010)(2000 – 2010)

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Page 14: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

So if the banks lost $550 BillionSo if the banks lost $550 BillionHow did these losses effect their bottom line?How did these losses effect their bottom line?

Or in other words, their EquityOr in other words, their Equity

Another good question. The answer is actually—not very much.Another good question. The answer is actually—not very much.

The next graph will show you the Banking Industry Equity looking at it from two The next graph will show you the Banking Industry Equity looking at it from two different perspectives:different perspectives:

(1) Equity as reported and equal to: Total Assets Less Total Liabilities(1) Equity as reported and equal to: Total Assets Less Total Liabilities

(2) Equity adjusted to account for an extreme case where all current (2) Equity adjusted to account for an extreme case where all current Nonperforming Assets go belly-up and none of the NPAs retain any value. Nonperforming Assets go belly-up and none of the NPAs retain any value. In this case Equity is calculated in the following manner:In this case Equity is calculated in the following manner:

Equity as Shown by Assets Less LiabilitiesEquity as Shown by Assets Less Liabilities

Less All NonPerforming Assets (NPAs)Less All NonPerforming Assets (NPAs)

Plus the Amount of Loan Loss Allowances (LLA)Plus the Amount of Loan Loss Allowances (LLA)

Page 15: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking Industry EquityBanking Industry EquityTwo ViewsTwo Views

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Page 16: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Wow, I Think I Hear You, Wow, I Think I Hear You, But I Still Cannot Believe What I Think You Are Trying to Tell Me.But I Still Cannot Believe What I Think You Are Trying to Tell Me.

Are You Saying That There Is No More Beef than $550 Billion Are You Saying That There Is No More Beef than $550 Billion to the Banking Crisis?to the Banking Crisis?

Well, yes and no. Now how is that for an answer.Well, yes and no. Now how is that for an answer.

Yes, I am telling you $550 Billion is the Bill the Banks Will Have to Pay for their significant Yes, I am telling you $550 Billion is the Bill the Banks Will Have to Pay for their significant role in the financial debacle.role in the financial debacle.

But no, there is more to the crisis than just the banks. Don’t forget the Government’s But no, there is more to the crisis than just the banks. Don’t forget the Government’s portion (i.e., Fannie, Freddie, FHA, VA, Ginnie Mae, the FDIC, AIG Bailout, etc.). portion (i.e., Fannie, Freddie, FHA, VA, Ginnie Mae, the FDIC, AIG Bailout, etc.).

You also have to take into account all the Household Equity that was lost as a result of You also have to take into account all the Household Equity that was lost as a result of the PANIC, including losses from stocks, bonds, and home devaluation.the PANIC, including losses from stocks, bonds, and home devaluation.

But I am saying much of that lost wealth will come back when people realize that things But I am saying much of that lost wealth will come back when people realize that things might not be as bad as the doomsayers would like you to believe.might not be as bad as the doomsayers would like you to believe.

In other words, let’s move on and fix our real problems and quit worrying about the banks, In other words, let’s move on and fix our real problems and quit worrying about the banks, foreclosures, and other things that have already been taken care of. foreclosures, and other things that have already been taken care of.

Page 17: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking Industry Equity to Asset RatioBanking Industry Equity to Asset RatioTwo ViewsTwo Views

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Page 18: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

How the Banking Industry PaidHow the Banking Industry Paid Their $550 Billion Bill Their $550 Billion Bill

Since we have gone to all the trouble of explaining the bill the Banking Industry had to Since we have gone to all the trouble of explaining the bill the Banking Industry had to pay for the misguided activities, it is also probably worthwhile to explain how the pay for the misguided activities, it is also probably worthwhile to explain how the Banking Industry paid the bill without greatly affecting Bank Equity.Banking Industry paid the bill without greatly affecting Bank Equity.

The following graphs will pretty much tell the story. The following graphs will pretty much tell the story.

We will be using the Banking Industry’s composite Income Statement to look at:We will be using the Banking Industry’s composite Income Statement to look at:

(1) Interest Income Less Interest Expense;(1) Interest Income Less Interest Expense;

(2) Dividends Paid to Stockholders; and(2) Dividends Paid to Stockholders; and

(3) Taxes Paid(3) Taxes Paid

I believe you will find this quite interestingI believe you will find this quite interesting

Page 19: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking Industry Interest IncomeBanking Industry Interest IncomeInterest Income Less Interest ExpenseInterest Income Less Interest Expense

One source of income for the Banking Industry is the interest rate spread between what they borrow One source of income for the Banking Industry is the interest rate spread between what they borrow their money at (or the rate the pay depositors for holding their money) and the rate which they their money at (or the rate the pay depositors for holding their money) and the rate which they charge borrowers to use that same money.charge borrowers to use that same money.

The banking industry accounts for this in two different accounts: (1) an interest income account and The banking industry accounts for this in two different accounts: (1) an interest income account and (2) an interest expense account.(2) an interest expense account.

Part of the way the Banking Industry paid for their $550 Bill was to take a larger spread on the interest Part of the way the Banking Industry paid for their $550 Bill was to take a larger spread on the interest rate they borrowed versus the interest rate they lent.rate they borrowed versus the interest rate they lent.

Like before, using a 2006 Benchmark number of $330 Billion number for interest income, we see:Like before, using a 2006 Benchmark number of $330 Billion number for interest income, we see:

2007 ($353 - $330) = $ 23 Billion increase in net interest income2007 ($353 - $330) = $ 23 Billion increase in net interest income

2008 ($354 - $330) = $ 24 Billion increase in net interest income2008 ($354 - $330) = $ 24 Billion increase in net interest income

2009 ($396 - $330) = $ 66 Billion increase in net interest income2009 ($396 - $330) = $ 66 Billion increase in net interest income

2010 ($431 - $330) = 2010 ($431 - $330) = $ 101 Billion increase in net interest income$ 101 Billion increase in net interest income

Total Industry Net Interest Income Increase = $ 214 BillionTotal Industry Net Interest Income Increase = $ 214 Billion

Page 20: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

History of Banking Industry Net Interest IncomeHistory of Banking Industry Net Interest IncomeInterest Income Less Interest ExpenseInterest Income Less Interest Expense

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Page 21: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking Industry HistoryBanking Industry HistoryDividends to StockholdersDividends to Stockholders

The banking industry has a history of paying out Dividends to the stockholders (or The banking industry has a history of paying out Dividends to the stockholders (or owners) of the banks.owners) of the banks.

So considering that these owners are partly responsible for the misguided activities of the So considering that these owners are partly responsible for the misguided activities of the banks themselves, it seems only fair that they should pay some of the bill. And they banks themselves, it seems only fair that they should pay some of the bill. And they have:have:

Again, using the 2006/2007 Dividend figure ($110 Billion) as a benchmark, then the part Again, using the 2006/2007 Dividend figure ($110 Billion) as a benchmark, then the part of the $550 Billion banking bill paid by the stockholders is:of the $550 Billion banking bill paid by the stockholders is:

2007 ($110 - $110) = $ 0 Billion2007 ($110 - $110) = $ 0 Billion

2008 ($110 - $ 51) = $ 59 Billion2008 ($110 - $ 51) = $ 59 Billion

2009 ($110 - $ 47) = $ 63 Billion2009 ($110 - $ 47) = $ 63 Billion

2010 ($110 - $ 41) = 2010 ($110 - $ 41) = $ 69 Billion $ 69 Billion

Smaller Amount of Dividends to Stockholders = $ 191 BillionSmaller Amount of Dividends to Stockholders = $ 191 Billion

Page 22: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

History of Banking IndustryHistory of Banking IndustryDividends to StockholdersDividends to Stockholders

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Page 23: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking Industry HistoryBanking Industry Historyof Taxes Paidof Taxes Paid

Well, of course if the banking industry made less pre-tax net income as a result of their Well, of course if the banking industry made less pre-tax net income as a result of their misguided ways, it also means that they paid less “taxes” on their income.misguided ways, it also means that they paid less “taxes” on their income.

Again, using 2006 as a pre-crisis benchmark for taxes, we see thatAgain, using 2006 as a pre-crisis benchmark for taxes, we see that

2007 ($ 68 - $ 46) = $ 20 Billion less taxes paid2007 ($ 68 - $ 46) = $ 20 Billion less taxes paid

2008 ($ 68 - $ 6) = $ 62 Billion less taxes paid2008 ($ 68 - $ 6) = $ 62 Billion less taxes paid

2009 ($ 68 - $ 6) = $ 62 Billion less taxes paid2009 ($ 68 - $ 6) = $ 62 Billion less taxes paid

2010 ($ 68 - $ 39) = 2010 ($ 68 - $ 39) = $ 29 Billion less taxes paid$ 29 Billion less taxes paid

Total Amount of Less Taxes Paid = $137 Billion less taxes paidTotal Amount of Less Taxes Paid = $137 Billion less taxes paid

Page 24: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

Banking Industry HistoryBanking Industry Historyof Taxes Paidof Taxes Paid

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Page 25: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

So Totaling Everything UpSo Totaling Everything UpWe FindWe Find

Now if we total our previous findings up, it should pretty well explain why Banking Now if we total our previous findings up, it should pretty well explain why Banking Industry Equity was affected very little by:Industry Equity was affected very little by:

Passing less of the interest spread to their customers: $214 BillionPassing less of the interest spread to their customers: $214 Billion

Distributing less Dividends to stockholder/owners: $191 BillionDistributing less Dividends to stockholder/owners: $191 Billion

Paying Fewer Taxes to the Government: Paying Fewer Taxes to the Government: $137 Billion $137 Billion

TOTAL For THE ABOVE THREE: $542 BillionTOTAL For THE ABOVE THREE: $542 Billion

Interesting—isn’t it?Interesting—isn’t it?

Who Said Bankers Were Stupid?Who Said Bankers Were Stupid?

Just in Case You Are Curious Just in Case You Are Curious

We Will Use Are Same Methodology Now to Look atWe Will Use Are Same Methodology Now to Look at

Banking Industry Salaries and BenefitsBanking Industry Salaries and Benefits

Page 26: Quanta Analytics

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History of Banking Industry Expenses to CoverHistory of Banking Industry Expenses to CoverEmployee Salaries, Benefits and BonusesEmployee Salaries, Benefits and Bonuses

The following graph shows the amount of banking industry expenses needed to cover employee The following graph shows the amount of banking industry expenses needed to cover employee salaries, benefits, and , bonuses to executive management.salaries, benefits, and , bonuses to executive management.

Using our benchmark methodology (and thus a $160 Billion for pre-crisis salaries/benefits) the Using our benchmark methodology (and thus a $160 Billion for pre-crisis salaries/benefits) the following table shows how those expenses have changed as a result of the Banking Financial following table shows how those expenses have changed as a result of the Banking Financial Crisis:Crisis:

2007 ($160 - $160) = $ 0 Billion change in salaries/benefits2007 ($160 - $160) = $ 0 Billion change in salaries/benefits

2008 ($152 - $160) = 2008 ($152 - $160) = ($ 7) Billion change in salaries/benefits($ 7) Billion change in salaries/benefits

2009 ($163 - $160) = $ 3 Billion change in salaries/benefits2009 ($163 - $160) = $ 3 Billion change in salaries/benefits

2010 ($168 - $160) = 2010 ($168 - $160) = $ 8 Billion change in salaries/benefits$ 8 Billion change in salaries/benefits

Change in Salaries/Benefits to Employees = $ 4 BillionChange in Salaries/Benefits to Employees = $ 4 Billion

I know this is a “cheap shot” and that the Banking Industry does need to keepI know this is a “cheap shot” and that the Banking Industry does need to keep

Operating As Smartly, Efficiently, and EffectivelyOperating As Smartly, Efficiently, and Effectively

As They Have in the PastAs They Have in the Past

I Just Thought You Might Have Wanted to Know Just the SameI Just Thought You Might Have Wanted to Know Just the Same

Page 27: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

History of Bank Industry Expenses to CoverHistory of Bank Industry Expenses to CoverEmployee Salaries and BenefitsEmployee Salaries and Benefits

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sal

arie

s/B

enef

its

in B

illi

on

s

Page 28: Quanta Analytics

For Questions contact Jim Boswell--email: Quanta.AFor Questions contact Jim Boswell--email: [email protected]@gmx.com

More to Come LaterMore to Come Later