The Value of the “Too Big to Fail” Big Bank Subsidy
By Guest Author - February 20th, 2010, 9:47AM
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Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
February 20th, 2010 at 4:09 pm
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.
February 22nd, 2010 at 9:35 am
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.