Big Banks get subsidy of $780bn, equal to entire “stimulus” bill, every year

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-warrenElizabeth 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?


Follow me on Twitter: @aravosis | @americablog | @americabloggay | Facebook | Google+ | LinkedIn. John Aravosis is the editor of AMERICAblog, which he founded in 2004. He has a joint law degree (JD) and masters in Foreign Service from Georgetown (1989); and worked in the US Senate, World Bank, Children's Defense Fund, and as a stringer for the Economist. Frequent TV pundit: O'Reilly Factor, Hardball, World News Tonight, Nightline & Reliable Sources. Bio, .

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  • grog

    Did I see this correctly, you’re using a post at zero hedge as “analysis”?

  • caphillprof

    Well, I didn’t edit my comments and they still stand as unedited.

  • ezpz

    “So you favor bankster entitlements?”

    No, of course not. I was simply quoting a part of your comment and added the word “first” in brackets because I thought that’s what you had originally said. Hence, my pre-edited reply.

  • caphillprof

    So you favor bankster entitlements?
    Subject: [americablog] Re: Big Banks get subsidy of $780bn, equal to entire “ stimulus” bill, every year

  • http://www.facebook.com/JurisNot Judson Witham
  • http://www.facebook.com/JurisNot Judson Witham

    Fact Is Americans are so Totally STUPID and LAZY they have ZERO BALLS I’ve spent more than 30 Years trying to wake them up …. they are Never Going To … Rather They Will Buy the BS of the Ruling Calss and the FAKER that Obama Is …. http://www.bing.com/search?q=America+Looted+Judson+Witham&go=&qs=n&form=QBLH&pq=america+looted+judson+witham&sc=0-11&sp=-1&sk=&ghc=1

  • http://buddybest.tripod.com/index.html BuddyNovinski

    Welllllllllllllllllllllllllllllllllfare for the weallllllllllllllllthy? Welllllllllllllllllllllllllllllll, yes! The god Pruneface, still worshiped with a great cult.

  • HeartlandLiberal

    The American people get what they vote for, and for decades, they
    have voted for members of Congress whose allegiance, it turns out, is
    not to the American people, but to the to 20%, or even just the 1%, and
    to the Corporate Oligarchy who have taken control of this nation’s
    economy, its Congress, and it media.

    Criminal activity was rampant in the banking and housing and mortgage
    industry, leading to the financial crisis and collapse of 2008. And to
    this day, not only has there been not one single CEO or member of those
    criminal enterprises held accountable, the Federal Government continues
    to MASSIVELY SUBSIDIZE this class of modern day Robber Barons. Actually,
    it is an insult to the Robber Barons of the end of the 19th century to
    compare them to today’s crooked Banksters and corporations. The Robber
    Barons were patron saints compared to these criminals today.

    And Congress does nothing to address this, much less stop it. Is it
    any wonder that the American People give Congress their lowest ratings
    in the history of the Republic?

    As for Obama’s laughing stock of an Attorney General, Holder? He
    admitted in testimony before Congress recently that it is just to darned
    hard to prosecute the crimes of the Too Big to Fail Banks, so he and
    the DOJ just cannot be bothered with even trying.

    Of course the tragedy is that when it comes time to go to the ballot
    box, the American People keep voting these same dysfunctional and failed
    members of Congress back into office.

    And the ongoing collapse of the American Economy and Dream continues apace.

  • Sweetie

    She’s going to play safe with everything. The public needs to feel like it has advocates. It’s part of the theater and always has been.

  • Sweetie

    “Holder admitted the other day that the reason the Obama administration refuses to prosecute the banks is that they pull everyone’s strings.”

    fify. The puppeteer doesn’t want uppity puppets and the puppets don’t want to bite the hand that feeds them.

  • ezpz

    To clarify, I was referring to the so called lawmakers, president, and even the media when I rhetorically asked what anyone was doing about it. Not so much ‘we the people’ who, as I said, are mostly powerless.

  • ezpz

  • brennan

    Ron Paul made a good point as to why wages have stagnated… the fed has pumped the market full of money…. which has in turn devalued the money…. now the people who get this money first like banks, wall street, large corporations and their consitutuents all profit from this explosion in the money supply however those at the bottom suffer because the inflation and devaluation of the currency makes the money available to them worth less.

  • brennan

    write again and again and again…. email them if they have email addresses listed for the public….

  • brennan

    no your right…..WRITE LETTERS to ALL of your representatives and senators for your state…. demand anti trust enforcement and the breakup of banks and the elimination of the subsidy…. and a month later write again… and a month later write again

  • ezpz

    I don’t know either. Letters, petitions, calls don’t seem to work. All they do is get you a canned response and your name on their mailing list. The upside to that is that we can unsubscribe and tell them why, but that’s only a momentary feeling of satisfaction, as it also accomplishes little to nothing.

    Maybe I’m also missing something as to what can be done, but the combination of powerlessness and outrage fatigue makes me just want to “..sha la la la la la live for today…”

    RIP Rob Grill

    http://www.youtube.com/watch?v=7zLPDZyHH6Y

  • nicho

    How about guillotines present?

  • fentwin

    What can we do? Vote? Write letters?

    Don’t get me wrong, I agree, but I have no clue as to what we can do to actually change things. Maybe its something relatively simple that has eluded me. Civil disobedience? We are so divided as a nation that I can’t imagine that ever happening.

  • fentwin

    #9, #9, #9

    (and I’m not referring to a economic plan)

  • eahopp

    Is it time to start investing in guillotine futures?

  • samizdat

    No, it’s all of the money being untaxed, or being hoarded by the TrillionsUSD by supranational corporations. Not to mention that wages have remained stagnant, as compared to inflation, since 1973.

  • ezpz

    It’s not either/or and it’s sad that the propaganda machine, especially from the D side of the coin, has many believing that there’s an equivalence. There isn’t. ‘Entitlements’ and corporate welfare are – SHOULD be – mutually exclusive.

  • ezpz

    Besides talking and fueling more outrage, what is anyone DOING about it?
    I have outrage fatigue. Again.

  • guest1

    This is a big reason why the economy isn’t growing, all that money out the window

  • keirmeister

    Fair enough. It really is sickening seeing who much $$$ is given to these “titans of industry”, all while we common folk are lectured to about the “Free Market”, the sins of welfare and being dependent on the government.

    And yes, SENATOR Warren is AWESOME! God bless that woman!

  • condew

    Raising the cap is the best way to get Social Security the extra revenue that’s needed. My point is that the additional revenue needed to make Social Security rock solid is about 3% of the $780bn subsidy being provided to the banks. But we can’t afford Social Security, while subsidizing the banks wasn’t even controversial until Senator Warren pointed it out.

    (I really like putting that Senator title next to her name.)

  • http://www.facebook.com/elijah.shalis Elijah Shalis

    Thats a lot of money, makes you wonder if they would even be profitable without it.

  • HolyMoly

    What we knew before was just the tip of the iceberg, and now we’re just barely at snorkeling depth in terms of what we know. And this is just the banking industry we’re finding out about. If, as it has been demonstrated, it’s possible that the banks have received many times more in subsidies than the public was made aware of, what about the oil subsidies? What about subsidies to mega-farmers? 3/4 OF A TRILLION DOLLARS just to that one industry alone. Perhaps another half trillion or more elsewhere?

    Cut Social Security because we’re hurting! My @$$! That’s not the wound from which we’re bleeding out, Washington.

  • keirmeister

    Actually, they could make Social Security permanently solvent by getting rid of the cap.

  • A_nonymoose

    Watch your back, Senator Warren, watch your back.

  • condew

    I seem to remember that to make Social Security rock-solid for the next 75 years, it needs $2 trillion in additional revenue; or about what we give to these banks in 3 years.

  • condew

    Even with such a subsidy, I can’t even get 1% interest on my IRA.

  • caphillprof

    I wish the Democrats would tell the Republicans, that if any entitlements are to be cut, these bankster entitlements should go.

  • Drew2u

    Now these are the “Welfare Entitlement Cuts” the public (unfortunately not necessarily congress) can get behind.

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