If a bank is designated as too big to fail (TBTF), it gets on the gravy train. So concluded an editorial at Bloomberg.
It pays to be too big to fail.
In the case of J. P. Morgan Chase bank, the subsidy is worth $14 billion a year, according to research published by the International Monetary Fund.
Around the world, central banks intervene to make cheap, newly created money available to bail out TBTF banks. They guarantee that all of the bank’s creditors will get money to repay banks. It’s like the FDIC, only it’s for the Big Boys. Think AIG.
The smart money then goes for high-risk, high-profit investments. Why not? They will be bailed out if they guess wrong. It’s “heads, we win; tails, we win.”
Bloomberg estimated the dollar value of J. P. Morgan Chase’s subsidy at $14 billion a year. For the 18 largest banks (out of 8,000), it is $76 billion a year.
This is just about the same as the banks’ annual profits. Concludes Bloomberg: “JPMorgan’s share of the subsidy is $14 billion a year, or about 77 percent of its net income for the past four quarters.”
Like all subsidies, the taxpayer largesse distorts supply. If the government supports corn farmers, you get too much corn. If the government subsidizes banks, you get too much credit. As of March, households, companies and government in the U.S. had amassed debts of $38.6 trillion, or 2.5 times the country’s gross domestic product. That’s up from 1.3 times in 1980. The picture is similar in the euro area, where debt outstanding is 1.8 times GDP, double the level of 1995.
Conclusion: “The result is a bloated finance industry: As of 2011, the sector accounted for 8.3 percent of the U.S. economy, compared with 4.9 percent in 1980.”
Is this likely to change? No. The banks are major sources of campaign financing.
More important is this: the central banks have always served as sources of bailout money for the largest banks. This goes back almost a century in the USA.
Central banks exist to serve as the banking cartel’s safety net.
It's a shame the whole nation has to go down because of the idiots in charge.
This is why I hate banks. A credit union that is member owned is a lot better than banks.
I agree that credit unions are much better than banks, because they are member owned. I have been a member of my credit union for over 40 years and they have NEVER needed to be bailed out. Those bank "idiots" should be ashamed!
Let's see: we give a bunch of banks and irresponsible govt types subsidies to keep them from going belly up, and yet the libs out there scream about oil/farm/etc type of subsidies.
What a bunch of hypocrites.
If one subsidy is bad, then in my estimation, they ALL are!
Fritz329th: I only use a credit union also, but if you think J.P. Morgan derives a 1/100 of a percent of their 'profits' from small customers like us or give a red rats butt about us not using their services for anything, I am afraid you are sadly mistaken
Is this where so most of our tax dollars go to and now that the Obamacare has passed the Government will increase the amount they give to all of these Banks and more of the Solyndra's as well an increase in the Salary's of Government Officials like congress and the Senate Bast###'s that are taxing the people more and more every year until we have no money left to buy food for our children. The Banks and the Senate will be able to buy what they want because they are the recipients of We the Peoples tax dollars and they are the only people that will buy another multi million dollar homes as there Vacation property's and all of the Rolls Royce's they own. The Federal Government will have a waiver from the Obamacare and the elected officials will not have to purchase the Obamacare but they will be able to go to the head of the line of any hospital and they will stay in the Hospital's Luxury suits in the Penthouse floor.
Everybody that is complaining needs to do something about it ,like vote the bast— out of office . We need to get a new party the dem & republican are the same ole sh– just different names , we need American spring take back our country again our fore father are rolling over in there graves!! America better wake up! God help us! Our government was not set up for those idiot to stay up there in congress for 20 to 30 years they are corrupt people they all should be hanged for what they are doing to our great country!
So, if youre upset abput this, why are you backing the candidate whos in their pockets??? Romney is a Wall Sreet puppet. Face it , the GOP picked ( the primary was a joke ) the WRONG candidate.
Since when did this start?
to big to fail my a— take out back and get a rope god bless the tea party come on ron paul
Whether they have or not remains to be seen. I agreee he was not my choice but they were correct in their opinion that several ( who might have been better ) were and are ''UNELECTABLE''. The main point is, even if he has a stroke and could serve out his term in a coma, he would do a thousand times better than odumbo, the most inept person that has ever occupied the oval office, (I refuse to call him President, I respect the office too much). This illegal alien and his Chicago gangster politicians and advisors (and I lived in the western suburbs of Chicago) have put our country (not theirs') in such a terrible condition, I am doubtful it will ever return to what it was. This idiot not only can't speak without a teleprompter, but he can't think without Valerie, Michelle, and the other inept idiots he has surrounded himself with, and none of them know what the hell they're doing except turning America into a model of the failed European countries (this they are doing very well)! All we can do is PRAY and vote the basTURD out of office.
More important is this: the central banks have always served as sources of bailout money for the largest banks. This goes back almost a century in the USA. The republicans are for big business, so let the blame fall with them. Ben Bernicke was appointed by W in his 8 years in office.
to big to fail my a— take out back and get a rope god bless the tea party come on ron paul. are you kidding me? Who do you think Ron Paul and the Tea Party work for? Big Business and lower taxes.