Without Taxpayer Help, Too Big to Fail Banks Would Only Break Even

[Fire Walk With Me]

Occupy Wall Street ‏@OccupyWallStNYC 2m

This is how much of your taxes goes to propping up too-big-to-fail banks:
http://www.dailyfinance.com/2013/02/22/bloomberg-too-big-to-fail-banks-not-profitable/ … #OWS


Wall Street banks once occupied a unique position of power, privilege, and prestige in this country. Looking back, the apogee was probably late in the Clinton administration, in the era of deregulation, when Treasury Secretary Robert Rubin -- former co-chair of Goldman Sachs and future director of Citigroup -- appeared on the cover of Time magazine with his protégé, Lawrence Summers, and Federal Reserve Chairman Alan Greenspan, over the headline "The Committee to Save the World."

After the cataclysm of 2008, much of the power and privilege remains, but the prestige is rapidly fading. Today brings what seems like a minor milestone in the banks' fall from grace: a Bloomberg editorial alleging that Wall Street's largest financial firms would only break even without taxpayer backstops, and calling for an end to the perverse incentives that the current arrangement creates.

Bloomberg knows that its business-focused readers may be unprepared for such news: "Granted, it's a hard concept to swallow." But as the editors explain, the widespread perception that JPMorgan Chase (JPM), Goldman Sachs (GS) et al. are too big to fail effectively gives them a discount when they borrow money, since creditors presume -- with good reason, given recent history -- that the government will step in and bail the banks out if they get into serious trouble. A recent study by two economists concluded that Wall Street's borrowing costs are thereby reduced by about 0.8 percentage points, a discount which "applies to all their liabilities, including bonds and customer deposits."

Calculate the total cost of that seemingly tiny reduction and you arrive at an $83 billion annual taxpayer subsidy to the 10 largest U.S. banks by assets -- "tantamount to the government giving the banks about 3 cents of every tax dollar collected." As if that weren't shocking enough, Bloomberg goes on to explain that the top five banks -- JPMorgan, Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), and Goldman -- aren't actually profitable, since the share of the total subsidy that they receive, $64 billion, is "roughly equal to their typical annual profits."

(Links and more at the article.)

[sabrina 1]

1. This is amazing, and if really true, and since it's from Bloomberg it is definitely

credible:

Calculate the total cost of that seemingly tiny reduction and you arrive at an $83 billion annual taxpayer subsidy to the 10 largest U.S. banks by assets -- "tantamount to the government giving the banks about 3 cents of every tax dollar collected." As if that weren't shocking enough, Bloomberg goes on to explain that the top five banks -- JPMorgan, Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), and Goldman -- aren't actually profitable, since the share of the total subsidy that they receive, $64 billion, is "roughly equal to their typical annual profits."

Everyone should print that out and hand it to the next moron who uses the words 'welfare queen' to complain about any money the poor receive. Including even any fraud there may be. Even if they were working hard to defraud the government, the poor couldn't come close to this kind of ponzi scheme being perpetrated on the people.

[Scuba]

2. "... an $83 billion annual taxpayer subsidy to the 10 largest U.S. banks ..."

K-Y Jelly optional.

[sabrina 1]

3. Add to that the subsidies we give to the Big Oil corporations and we could wipe out

the deficit, which ironically they caused, with no problem.

[Downtown Hound]

4. These welfare queens need to pull themselves up by their bootstraps and quit livin off the guvn'mint

Hmmm...where have I heard that before?

[Demeter]

5. Nah. They'd go UNDER

That break even BS is just wishful thinking.

[Jerry442]

6. $83,000,000,000 ain't the half of it.

When you know you can count on the Fed to loan you $billions anytime practically for free, that's got to be worth a lot. Oh yeah, and those get-out-of-jail-free cards that every TBTF bank gets, what's the fair market value on them?

[WillyT]

7. HUGE K & R !!!

[xtraxritical]

8. Use local banks and credit unions for all your banking needs, screw the giants.

[AndyA]

9. So, these "super hero" CEOs that must be paid HUGE amounts of money

Aren't worth it because they can't turn a profit without corporate welfare paid for by taxpayers.

So much for the "we have to pay them well to get and keep the best people..." line.

Note to corporations: If your top people can't guide your company toward profitability, they aren't doing their job and aren't worth their salaries. Perhaps cutting their salary by 90 percent or so would be a good start toward making a profit. First, you save money by cutting their salaries, and you may get lucky and they'll quit, allowing you to find someone who can actually DO THE JOB at a fraction of what you've been paying.

Congress wants to cut Social Security, Medicare, and Medicaid while allowing this. There's another group of people who should be cut for not doing their jobs!

[sabrina 1]

11. I remember that, the claim that we had to pay them exhorbitant amounts of money, even after they

failed so spectacularly, because we needed to keep them! I think sometimes they really do think we are stupid, or maybe the reality is that THEY are and that they really believe this garbage themselves.

I wanted to read this article again so that I could be sure I had read it correctly the first time.

It's astounding that still, after five years, they still are in trouble and are still trying to make the people pay their bills for them and Congress and European governments are still propping them up.

[limpyhobbler]

10. Gov't assisted thievery. nt