Chris wrote the other day about how a new analysis showed that too-big-to-fail banks are getting a $83 billion per year taxpayer subside, equal to the amount of their supposed profits.
Well, a new analysis shows that the amount of the subsidy is nearly ten times that – more than $780 billion a year.
What’s particularly interesting about that figure, $780 billion, and something no one has yet noticed, is that it’s almost the exact size of the fiscal stimulus that was passed in early 2009 to save the economy: $787 billion. Except that the bankers’ stimulus is being spent every single year again and again and again. The Republicans, and some Democrats, never cease to talk about “how much money” we “wasted” on the supposedly “failed” stimulus. But you never hear them talking about the same amount of money that’s been actually wasted on their bankster friends.
The analysis is done by Chris Whalen, who is a top banking analyst. Washingtonsblog, that looked at Whalen’s analysis and did a great job translating it into basic English, notes that Whalen has been praised by Nouriel Roubini, so he’s the real deal.
Whalen’s analysis shows that the big banks are actually getting the equivalent of at least $780 billion a year from the feds. Per Washingtonsblog, the subsidies include:
- #360 billion in Federal Reserve subsidies;
- $120 billion in federal deposit insurance;
- $100 billion in government-guaranteed loans;
- “At least $100 billion in monopolistic advantages in the secondary market for home mortgages.”
- More than $100 billion in fees in the over-the-counter (OTC) derivative market.
The total? More than $780 billion a year.
At only $83 billion, the earlier estimate, banks were only breaking even without the subsidy – imagine how badly they’d be doing without the newer larger figure. Here’s from our earlier post:
The top five banks — JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc…. with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of [the $83bn in] corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.
Elizabeth Warren got into this subsidy with Fed Chair Bernanke the other day at a Senate hearing, where Bernanke agreed with her that we ought to get rid of the subsidy. And this was just the $83 billion estimate that they were talking about, not the newer, nearly ten times larger, $780 billion.
Elizabeth Warren: So I understand that we’re all trying to get to the end of “too big to fail.” But my question, Mr. Chairman, is until we do, should those biggest financial institutions be repaying the American taxpayer that $83 billion subsidy that they are getting?…It is working like an insurance policy. Ordinary folks pay for homeowners insurance. Ordinary folks pay for car insurance. And these big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year simply because people believe that the government would step in and bail them out. And I’m just saying, if they are getting it, why shouldn’t they pay for it?
Chairman Bernanke: I think we should get rid of it.
And as Elizabeth Warren has warned, “too big to fail” leads to other problems, including “too big for trial.”
Even US Attorney General Eric Holder admitted the other day in a Senate hearing that the reason the Obama administration refuses to prosecute the banks is that they are simply too big for trial:
I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute, if we do bring a criminal charge, it will have a negative impact ont he national economy, perhaps even the world economy. And I think that is a function fo the fact that some of these institutions have become too large…. I think it has an inhibiting impact on our ability tob ring resolution that I think would be more appopriate.
Chris asked the most important question the other day – why aren’t we breaking these banks up?:
Now that Attorney General Holder has publicly said the big banksters are “too big to prosecute,” why are we not seeing any move to break them up?
The big banks brought down our economy and got away with economic murder. And while we’re finally hearing from people like Holder the suggestion that the banks “should” have been prosecuted, but-for their “too big to prosecute” status, those banks are still receiving $83 billion in government handouts every year(roughly the amount of their so-called profits).
Just last week, the Chairman of the US Federal Reserve, Ben Bernanke, agreed with US Senator Elizabeth Warren that the TBTF/TBTP banks should no longer receive their $83 billion a year taxpayer subside. So why are they? We’d at the very least save $83 billion a year if we broke up the big banks, that’s not a small annual savings when they’re considering gutting Medicare and Social Security for far fewer savings (raising the Medicare eligibility age might save the feds $15bn a year, while breaking up the banks could save $83bn).
Bernanke also suggested breaking up the banks in 2010….
Since the political class has finally come around to a fact the rest of us knew a long time ago (Holder really ought to read more Taibbi), why is this charade still going on? Why are taxpayers subsidizing Wall Street, and why do we continue to let Wall Street hold America’s economy hostage to its own largesse?
It’s rather disturbing to hear the US Attorney General express such fear of being held hostage by a criminal enterprise, yet he offers no solution to the Wall Street Mafia.
If the banks are too big to fail, and too big to prosecute, then break them up and be done with it.
And it’s not just Bernanke. The head of the Dallas Fed, Richard Fisher, agreed.
And as Chris notes today, even Republicans are starting to join the fray in criticizing the banks. Is the time for breaking them up finally at hand?