Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Kay headline "More regulation will not prevent next crisis." Which is probably correct if the regulation is NOT aimed at forcing the financial sector back into subservience to the real economy.

What I've been trying to find is some indication of how much the large banks and other financial institutions make trading for their own accounts, as a percent of revenues, or of profits. My guess is that it has gone from around five or ten percent in the 1960s to well over fifty percent now. I looked at Morgan Chase's financials yesterday and did not see it broken out.

Anyone have any clues where to find this?

What I did find so far is interesting - the growth of derivatives has not increased the amount of lending.

Report on the Condition of the U.S. Banking Industry: Second Quarter, 2006
    Assets    Loans    Derivatives (billions)    Loans as percent of Derivatives
2001    5896.783    2968.905    48,144    6.17%
2002    6256.824    3153.028    57,746    5.46%
2003    6926.108    3404.117    72,692    4.68%
2004    7963.241    3945.799    88,671    4.45%
2005    8645.888    4351.995    98,749    4.41%
2006 Q2    9282.941    4598.577    117,631    3.91%
    3386.158    1629.672    69487   
    57.4%    54.9%    144.3%    Increase from 2001 to 2006 2Q

Also, from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=970655
Credit Derivatives and Bank Credit Supply
Federal Reserve Bank of New York - Banking Studies Department February 2007
FRB of New York Staff Report No. 276

Turning to the new loan data, for term loans, average maturity
increases and spreads decline as credit derivatives protection increases, especially for large borrowers. The results for the volume of lending are more mixed: the volume of
large term loans is unaffected by changes in the degree of credit derivatives protection,
while the volume of smaller term lending decreases. Overall, the results suggest an
increase in the supply of credit to large term borrowers. Since large firms are more likely
to be "named credits" in the credit derivatives market, this finding suggests that the
benefits of credit derivatives may accrue mainly to these firms, rather than being spread
more broadly across the business sector.
In contrast, there is little to suggest that increased use of credit derivatives leads to
an increase in loan supply for commitment lending, to either large or small borrowers.
The volume of new commitment lending falls as net credit protection increases, and loans
spreads are basically unchanged. The average maturity of loans to small commitment
borrowers also falls as credit derivatives protection increases.

by NBBooks on Wed Mar 26th, 2008 at 11:46:18 AM EST

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