America’s TBTF Bank Subsidy From Taxpayers: $83 Billion Per Year

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America’s TBTF Bank Subsidy From Taxpayers: $83 Billion Per Year

Day after day, whenever anyone challenges the TBTF banks’ scale, they are slammed down with a mutually assured destruction message that limitations would impair profitability and weaken the country’s position in global finance. So what if you were to discover, based on Bloomberg’s calculations, that the largest banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers? The stunning truth is that the top-five banks account for $64 billion of an implicit subsidy based on the ludicrous (but entirely real) logic that: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. Perhaps this realization will increase shareholder demands – or even political furore? The market discipline might not please executives, but it would certainly be an improvement over paying banks to put us in danger.

 

Via Bloomberg,

… the biggest U.S. banks … make the case that size is a competitive advantage. It helps them lower costs and vie for customers on an international scale. Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail.

Lately, economists have tried to pin down exactly how much the subsidy lowers big banks’ borrowing costs. In one relatively thorough effort, two researchers — Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz — put the number at about 0.8 percentage point. The discount applies to all their liabilities, including bonds and customer deposits.

Big Difference

Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.

Rest here…

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4closureFraud.org

Comments
3 Responses to “America’s TBTF Bank Subsidy From Taxpayers: $83 Billion Per Year”
  1. Sarah says:

    Look, the taxpayers had to pay the 25 Billion required for the AG organized crime settlement, no self-respecting mobster would pay a parking ticket out of their own pocket.

  2. Sarah says:

    If folks knew how much corporate ‘Murica is subsidized by the taxpayer, that might change their perspective on taxes, if not lead to a peaceful revolution. Ironic, that the propaganda units within the corporate press argued against helping homeowners (or students, or anyone surviving in near destitution) with a prison sentence of tyrannical debt because that would “harm” the taxpayer. Wonder what the failed Iraq war did for the taxpayer? It burned over a trillion out of the taxpayers pockets. (Sorry, we’ll need to take your houses also)

  3. Pete Everts says:

    BBQ a BANKER.

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