Michael Cembalest

I’m mesmerized by this JPMorgan research chart showing that big banks shouldn’t be broken up because they lend so much more to businesses and consumers than small banks do. See:

Basically for every dollar of normalized capital, JPMorgan has extended $12 of credit between March 2010 and September 2012, according to this note by JPM’s Michael Cembalest. Whereas the small banks have loaned out only about $2. Get with the program, small banks!

The trick here – besides “normalized capital”1 – is that “credit extended” means (1) “changes in commercial and consumer loan balances” plus (2) syndicated loan, corporate bond, muni bond, etc. underwriting. That is, if you stand between a company looking for money and the market that provides it, you get, um, credit for extending credit, whether you do that standing-between in traditional banking ways (take deposit, make loans) or in traditional investment banking ways (match bond buyer with bond issuer). “See, we’re lending,” says JPMorgan. “We’re just not lending our money.”2

As a rhetorical move, I say: A+. Read more »