Tentacle Banks: International Banks Directly Control Thousands of Entities
As they rapidly gobbled up the economy, the biggest U.S. banks created more 10,000 subsidiaries in ways so as to escape taxes and tighter regulation, according to a Federal Reserve study. The Fed study included the banks’ overseas entities. That these banks are not U.S. banks, but really international banks, is clear when one realizes that, for many of the banks, more than half of the legal entities they own are located outside the U.S.
JPMorgan & Chase Co., the largest lender in the United States, has almost 3,391 subsidiaries. Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. each have more than 2,000, while Citigroup Inc. has 1,645.
Thomas Hoenig of the Federal Deposit Insurance Corp. complains that this makes these firms “too complicated to manage.”
“When regulators are left to curtail the risk of trillion- dollar megabanks with hundreds of affiliates, we know that too big to fail is also too big to manage” said U.S. Senator Sherrod Brown, an Ohio Democrat and member of the Senate Banking Committee.
Morgan Stanley and Goldman Sachs, investment banks, have thousands more subsidiaries than some larger banks, who focus on commercial and consumer lending. Each have about 3,000 legal units, more than doubling the 1,366 entities owned by Wells Fargo & Co., which has roughly 40 percent more assets than Goldman Sachs and 75 percent more than Morgan Stanley. While Morgan Stanley, Goldman Sachs and Citigroup own half of their legal entities outside of the U.S., JPMorgan and Bank of America keep only a quarter overseas.