Naked Capitalism has the article Wolf Richter: How Banks Hurt the Real Economy – FDIC’s Hoenig to Senate.
The largest bank on his list, JPMorgan Chase, earned $26 billion over the four quarters. But it plowed $27.6 billion – or 106% of its income – into share-buybacks and dividends. If it had retained that income, it would have raised its capital by that amount, and it would have been enough to make an additional $250 billion of loans under current capital rules.
In total, the 10 largest banks combined, on an annualized basis, will plow 99% of their earnings into share-buybacks and dividends. Share-buybacks alone amount to $83 billion (not counting dividends). Under existing capital rules, if the banks were to retain this capital instead of buying their own shares with it, they could have increased commercial and consumer loans by $741 billion.
What this article fails to even mention is that the banks aren’t making more commercial and consumer loans because the economy is stagnant. There are not enough customers demanding goods and services to make it wise for corporations to expand capacity. Corporations already have more capacity than they need in order to supply existing demand. As long as we keep concentrating wealth in fewer and fewer hands, the economy needs less and less capacity to satisfy demand.
If there were good opportunities for banks to lend to (and make money) they would certainly find a way to do it within existing regulations (as this article makes clear). The Fed put out $29 trillion in liquidity to bail out the banks. Where is that money sitting? It is not being circulated in the real economy.