Brown & Vitter Try to End ‘Too Big to Fail’



My Sunday Washington Post Business Section column is out. This morning, we look at the question: Can two senators end ‘too big to fail’?

Here’s an excerpt from the column:

“Just how much of a subsidy are the banks receiving? An International Montetary Fund Working Paper quantified it as creating an 80 percent basis point advantage to TBTF banks. A 2012 FDIC study found similar advantages. The implicit government guarantee that these banks would not be allowed to fail allowed them to obtain credit at a more advantageous rate. Bloomberg calculated that this amounted to a taxpayer subsidy of $83 billion a year to the 10 largest U.S. banks, ranked by assets — and $64 billion to the five largest. At the request of Brown and Vitter, the Government Accounting Office is trying to more precisely quantify the annual subsidy to megabanks from the U.S. government.

In this column, I want to look at two broad issues: First, what does the legislation (TBTF Act, S. 798) purport to do? How would it affect the competitive landscape for community and regional banks? Could it prevent future megabank bailouts?”

Good stuff . . .




Can two senators end ‘too big to fail’?
Barry Ritholtz
Washington Post, May 12, 2013

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