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Yet Another Huge Bank Failure in the USA

Jan 13, 2009
Economic Reality

Up until last year, CitiGroup was the largest bank in the USA and in the top 3 globally.  Now Citigroup is breaking itself up as it desperately tries to avoid total collapse:

  • Citi is selling its Smith Barney brokerage and investment business to Morgan Stanley so that it can raise $2.7 B in emergency cash.  Citigroup is selling 51% of Smith Barney now followed potentially by another $2.5 B to follow within 5 years if Morgan Stanley decides to expand its ownership of Smith Barney.
  • Citi is also jettisoning 1/3 of its loan book by spinning off $600 B in bad “assets” into a seperate “bad bank” that can be further broken-up and sold off to the US government and other high-risk junkyard investors.

To put the size of this spin-off in a Canadian perspective, the resulting “bad bank” will have 50% more “assets” than the total assets of the Bank of Montreal and slightly more “assets” than the TD Bank.

The $1.2 T magnitude of the 2009 US economic bailout is approximately equal to the size of the entire Canadian GDP.  According to Statistics Canada, the Canadian economy is dependant on exports for 45% of this GDP and 76% of those exports are based on trade with the USA.  However, Canada’s trade surplus is currently plumeting with November 2008 exports running at 50% less than September’s export volume. 

The worst of the fallout has still to hit the Canadian economy and ultimately Canadian banks.  Given the rate of erosion of exports, this will likely occur within 90 days if the balance of trade dips negative.  

In the last 6 months, the largest (Citigroup) and thrid largest (Wachovia) banks in the USA have crumbled – anyone who thinks that the Canadian banking industry is immune to these issues is simply not in touch with reality.

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Calculate Carbon Footprint of Your Bank Account

Dec 9, 2008
Economic Reality, Green Reality

Bank Funded GHG

Is government intervention necessary to kick-start funding of alternative energy projects in Canada? 

According to ClimateFriendlyBanking.org , the top 5 Canadian banks provided $55 B in direct funding for coal, gas, and oil production in 2007.  To put this in perspective, Canada’s entire military budget that year was only $17 B. 

If indirect funding is counted, the total credit extended for greenhouse gas (GHG) emitting fossil fuel production totals $155 B as illustrated below:

Bank Funded GHG 

This funding resulted in 625 M tonnes of CO2 emissions per year from fossil fuels - most of which is domestic GHG emission.   For example, in 2006 Canada’s entire GHG production was 583 M tonnes from all sources.

Meanwhile these same banks provided a total of only $6.8 B in direct funding for renewable, alternative energy production.  In other words, Canadian banks directly funded over 8x more GHG-intensive energy production than green energy production.

Your GHG Account

So what does this have to do with your bank account?

From previous posts on this site, you know that banks leverage their deposits by a ratio of approximately 10:1.  So for every dollar that you leave in a bank account, the bank lends out $10. 

By dividing the total funding of GHG-producing loans by the total amount deposited, it is easy to calculate the proportion of deposits that fund GHG emissions.  Multiply that by your bank balance, and voila, you have calculated the carbon footprint of your bank account.

To simplify this, you can readily calculate the carbon footprint of your bank balance by using the onlne calculator at  ClimateFriendlyBanking.org.

You can also determine how you can trim your personal funding of GHG emissions just by switching banks! 

For example, moving $5000 from the Bank of Montreal (535 Kg of CO2) to the TD Bank (485 Kg) will save 50 Kg in CO2 emissions – roughly equal to parking a small car and not driving it for 9 days.

Fund Green Jobs Instead
A study by the David Suzuki Foundation found that a $16 B investment in renewable energy—wind, solar, low impact hydro, biomass and geothermal—could in Ontario alone create:

  • 5,000 jobs in the wind energy sector by 2010
  • 77,000 jobs in wind energy by 2020
  • 18,750 jobs in geothermal energy within 2 years
  • 51,000 jobs in geothermal energy systems by 2020
  • 25,000 jobs in solar energy systems by 2025

This funding, which is less than 1/2 of what our banks are lending to generate fossil fuels, would install more than 12,000 megawatts of renewable energy capacity by 2020—enough electricity to entirely phase out all of Ontario’s coal plants.

These are not idle claims, the UNEP reports that Denmark created 17,000 permanent jobs within 5 years of launching a major investment program in wind energy production.  In Germany, over 45,000 people are employed in the wind energy industry.

Wind also presents a unique opportunity for a new cash crop in rural Ontario.  Farmers can lease their land to a wind developer. Or farmers can install, own and operate the turbines themselves. According to the Ontario Sustainable Energy Association, if 1/2 of Ontario’s farmers install only one 1 MW wind turbine, they could pump $4 billion through the rural Ontario economy by harvesting the wind!

Who says we have to choose between economic prospertity and a green future? 

And why are we focusing on bailing out the auto-industry when we could be replacing lost plants with green jobs?

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