Dean Baker of the Center for Economic Policy Research looked beyond the TARP to see how much Uncle Sam is subsizidizing the banks considered “too big to fail” — beyond TARP. Call it the Value of the “Too Big to Fail” Big Bank Subsidy.
His conclusions?
-The spread between big banks’ (1.15%) and smaller banks’ (1.93%) cost of funds is 0.78%:
-The annual boost to profits of 18 biggest banks from that funds-cost advantage: $33 billion;
-Pre-2008 spread in big and small banks’ funds-cost: 0.49%:
-Part of big banks’ profits from rate “subsidy” (1H09): 48%:
To give this some context, Dean compares it to the Temporary Assistance for Needy Families (TANF) and to US Foreign Aid Spending. Not including TARP, the “TBTF bank subsidy” was more than twice as large as the TANF grant for 2009; the bank subsidy is almost 20 percent larger than spending on foreign aid.
Here is something to think about: Even after the TARP has been fully paid back, the US Government is STILL bailing out TBTF banks more than we are giving bailouts to US families with hungry kids, and more than all of our overseas aid . . .
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Sources:
Value of the “Too Big to Fail” Big Bank Subsidy.
DEAN BAKER AND TRAVIS MCARTHUR
Center for Economic and Policy Research, September 202009
The Big Bank Theory
How government helps financial giants get richer
Dean Baker
Boston Review, JANUARY/FEBRUARY 2010
http://bostonreview.net/BR35.1/baker.php
Job-Creation Cacophony
BILL ALPERT
BARRONS FEBRUARY 22, 2010
http://online.barrons.com/article/review.html
See also:
The Cost of Saving These Whales
GRETCHEN MORGENSON
NYT, October 3, 2009
http://www.nytimes.com/2009/10/04/business/economy/04gret.html
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