Remember That $83 Billion Bank Subsidy? We Weren't Kidding ...ALSO about the size about the size of the sequester cut

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Remember That $83 Billion Bank Subsidy? We Weren’t Kidding …ALSO about the size about the size of the sequester cut

Remember That $83 Billion Bank Subsidy? We Weren’t Kidding …ALSO about the size about the size of the sequester cut

Something new everyday …sigh!Not to mention this amount is about the same size of the $85 billion in deep cuts set to ripple across country.

What is going on in the U.S.?

Bloomberg-

Our calculation, in a Feb. 21 editorial, showing that the top 10 U.S. banks receive a taxpayer subsidy worth $83 billion a year has generated some, um, discussion. It’s a big number, and the subsidy is a big issue for the banks.

How did we get there? To recap, the largest banks can borrow money at a lower rate because creditors assume the government, on behalf of taxpayers, will rescue them in an emergency. In a 2012 study, two economists — Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz — estimated the value of that too-big-to-fail subsidy at about 0.8 percentage point. We multiplied that number by the top 10 U.S. banks’ total liabilities to come up with $83 billion a year.

Some said that we shouldn’t have used total liabilities in the calculation. A lot of those liabilities are customer deposits, the argument went. Since these are explicitly guaranteed by the Federal Deposit Insurance Corp., why would the subsidy apply to them?

[BLOOMBERG]

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