Major US banks go to great lengths to lend to the rich

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Powerful lending companies at leading US banks lend money to some of the richest Americans who buy their second (or fifth) homes, make big investments, and even keep smart tax records.

New data shows that loans to asset management clients at JPMorgan, Bank of America, Citi and Morgan Stanley have grown 50% over the past four years, compared with just 9% growth in their total loan portfolios.

Cheap money

It’s no secret why banks are happy to offer loans to the rich – rich clients have very low losses. In fact, JPMorgan and Citi now lend more to high net worth clients than to millions of credit card clients, whereas just a decade ago JPMorgan made loans. Five times for both credit card customers and private customers.

So what has changed? The high-end lending business revived after the Federal Reserve cut interest rates last year and wealthy clients seized on historically cheap cash:

  • Wealth units at JPMorgan Chase, Bank of America, Citigroup and Morgan Stanley provided over $ 600 billion in loans in the second quarter of this year, up 17.5% from 2020.
  • Wealth management loans in the second quarter accounted for 22.5% of total loans in these banks, compared to 16.3% in 2017.

“The rates are so low that they look at them like cheap money,” said Christopher Boyette, a private equity lawyer at Holland & Knight. Financial Times

“Legal tax evasion”

Critics argue that all borrowing allows the rich to evade taxes. An investment value loan is a quick way to raise cash without the significant capital gains tax that can arise from the sale of an asset.

“The rich, they operate under a completely different tax system, where all this accumulated wealth is not taxed unless they sell – and they are so rich they don’t have to sell.” – Frank Clemente, Director of American Advocacy Group for Tax Justice , told FT. Clemente went on to say that some wealthy investors are engaged in “legal tax evasion.”





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