Major U.S. Banks Are Dedicated to Financing Wealthy

The strong lending business of the top US banks buys a second (or fifth) home, invests heavily, and even lends to some of the wealthiest Americans with clever tax accounting. I am doing.

Loans to wealth management clients at JP Morgan, Bank of America, Citi and Morgan Stanley have increased by 50% over the last four years, but overall loan books have increased by only 9%, according to new data. ..

Cheap money

It’s no secret why banks are delighted to offer loans to wealthy people. Wealthy clients have a very low loss record. In fact, JP Morgan and Citi now lend more to high net worth customers than millions of credit card customers, whereas only 10 years ago JP Morgan lent them. 5 times As much as credit card customers and individual customers.

So what has changed? Since the Federal Reserve Board cut interest rates last year, the lending business to senior management has been active, and wealthy clients have jumped at the opportunity to get historically cheap cash.

  • The wealth management divisions of JPMorgan Chase, Bank of America, Citigroup, and Morgan Stanley increased 17.5% from 2020 and financed more than $ 600 billion in the second quarter of this year.
  • Wealth management loans in the second quarter accounted for 22.5% of all loans at these banks, up from 16.3% in 2017.

“We consider it cheap money because interest rates are so low,” said Christopher Boyett, a lawyer specializing in personal wealth practice at Holland & Knight. Financial Times..

“Legal tax avoidance”

Critics argue that all borrowing allows the wealthy to avoid taxes. Loans for the value of an investment are a quick way to raise cash without the large capital gains tax that results from the sale of an asset.

“The wealthy people operate under completely different tax systems, and all this accumulated wealth is not taxed unless they are sold, and they are so wealthy that they do not need to sell,” he said. Frank Clemente, director of the Americans for Tax Fairness advocacy group, said. I told FT. Clemente further said that some wealthy investors are working on “legal tax avoidance.”

Major U.S. Banks Are Dedicated to Financing Wealthy

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