“The biggest US banks are wrestling with an intractable problem. It is not a surge in loan defaults, a wave of cyber attacks or mounting lawsuits. It is far more serious: they are on the verge of making too much money.
“JPMorgan Chase is on track to make $25bn or more this year – as much as the gross domestic product of Paraguay – with at least a 17 per cent return on common equity that takes the bank back to the heady levels of 2007.
“In a different political atmosphere this might be a moment for celebration. Not only have banks such as JPMorgan and Wells Fargo survived the crisis, they are thriving again, as they showed in their results on Friday. Even Citigroup and Bank of America, which took $90bn of bailout money between them, are out of the emergency room, working their way through bad assets and competing for new business. Their shares are up 95 and 78 per cent respectively in 12 months.
“At another time, excess cash would be handed over to shareholders and employees. Half of revenues from investment banking would be paid out to staff and up to – and sometimes more than – 100 per cent of earnings would be distributed to investors via dividends and share buybacks.”
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