The Value of the “Too Big to Fail” Big Bank Subsidy

Category: Bailouts, Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

2 Responses to “The Value of the “Too Big to Fail” Big Bank Subsidy”

  1. KidDynamite says:

    there is a massive flaw here. Baker asserts that it’s possible that the “taxpayers are in fact giving a substantial subsidy to these large banks as a result of the TBTF policy.”

    there’s only one problem – it doesn’t actually cost the taxpayer anything. Just like the TLGP doesn’t actually cost the taxpayer anything.

    said differently, the Fed could say “we will not allow Citibank to fail under any circumstances.” this might reduce Citi’s cost of funds by, let’s just say, 50 bps, but since it keeps the ponzi going and makes it so that Citi does can still raise funds and does not default, the Fed (and thus the taxpayer) doesn’t HAVE to pay the bills. voila. ponzi lives.

  2. Thatguy says:

    KidDynamite,

    Perhaps you haven’t thought this statement all the way through:
    “there’s only one problem – it doesn’t actually cost the taxpayer anything.”

    AYFKM!!!!! It’s already cost the taxpayer plenty. Just because the costs are implicit, doesn’t mean that they aren’t real as we’ve all seen in recent history…. and they are astronomical. The costs are paid… eventually.