Taxpayers Are GIVING Big Banks $83 Billion A Year!

"The top five banks -- JPMorgan, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs - - account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits.

In other words, the banks occupying the commanding heights of the U.S. financial industry -- with almost $9 trillion in assets, more than half the size of the U.S. economy -- would just about break even in the absence of corporate welfare.

In large part, the profits they report are essentially transfers from taxpayers to their shareholders."

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Banks Are Not Profitable Without Annual Gift

Why Should Taxpayers Give Big Banks $83 Billion A Year?

Bloomberg

On television, in interviews and in meetings with investors, executives of the biggest U.S. banks -- notably JPMorgan Chase & Co. Chief Executive Jamie Dimon -- make the case that size is a competitive advantage.  It helps them lower costs and vie for customers on an international scale.  Limiting it, they warn, would impair profitability and weaken the country’s position in global finance.

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all?  What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Granted, it’s a hard concept to swallow.  It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy.  The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency.  The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail.

Lately, economists have tried to pin down exactly how much the subsidy lowers big banks’ borrowing costs. In one relatively thorough effort, two researchers -- Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz -- put the number at about 0.8 percentage point. The discount applies to all their liabilities, including bonds and customer deposits.

Small as it might sound, 0.8 percentage point makes a big difference.  Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year.  To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.

The top five banks -- JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. - - account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits.  In other words, the banks occupying the commanding heights of the U.S. financial industry -- with almost $9 trillion in assets, more than half the size of the U.S. economy -- would just about break even in the absence of corporate welfare.  In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

Neither bank executives nor shareholders have much incentive to change the situation. On the contrary, the financial industry spends hundreds of millions of dollars every election cycle on campaign donations and lobbying, much of which is aimed at maintaining the subsidy. The result is a bloated financial sector and recurring credit gluts. Left unchecked, the superbanks could ultimately require bailouts that exceed the government’s resources. Picture a meltdown in which the Treasury is helpless to step in as it did in 2008 and 2009.

Continue reading...

This graphic shows the enormous size of the subsidy.

Comments

[Exile]

Well, if you can't beat 'em, join 'em. I think I'll buy some Wells Fargo stock tomorrow.

[john]

Coin in a fishes mouth.

[Josie]

Just watched the Corker and The Bernank exchange on Yahoo video. Corker calls out Ben on savers and seniors and Ben responds with unemployment as a primary goal without addressing savers directly. By not responding directly, The Bernank admits that savers are not a concern at all. Screw em. Moreover, he gets testy and defensive when discussing big bank subsidies upon "exit"...

A defensive Fed chair is not a good sign. Defensiveness is a sign of weakness and fear in the face of real questions...

[chunga]

How do you like this? A banker finds her way into Federal Court as a "Special Master". What does she do? Nothing. How much does she get paid? $300/hr!

RI Special Master Merrill W. Sherman - Former Banker - Corrupts Federal Foreclosure Order

http://www.foreclosurehamlet.org/profiles/blogs/ri-special-master-merrill-w-sherman-former-banker-corrupts-federa

These people are as blinded by their avarice as the Bourbon monarchs once were.

[DailyBail]

Thanks chunga. Great link.

[JosephConrad]

As a group, Americans have deteriorated into a ragtag mob or Ignorant, Oblivious, Stupid, Racist Cowards - totally committed to their own self-interest! What's happening on Wall Street is akin to DRED SCOTT SAVING HIS MASTER FROM GOING BROKE FROM HIS OWN AVERICE! This nation NEEDS to implode so that soemthing far better may rise from the fetted asses!

[chunga]

I really do think the judge is being undermined...why else would he give this Sherman subpoena powers?

Then again, he hasn't told her to get moving or fired her sorry ass.

[Howard T. Lewis III]

The economic destruction of the U.S.and its great food production is the goal.

[SKINFLINT]

This article dovetails nicely with the Bloomberg piece. Basically the US is in a bad spot, as we lend an enormous amount to these fools.

[Sagebrush]

The Taxpayers are not giving the big banks anything, it's being stolen. And it's a hell of a lot more then $83 billion.

[Howard T. Lewis III]

LIBOR and the looting of Wall Street all going to English banks. All the rest from Fat Janet the Molester to the murders on 9-11-2001 is window dressing for the criminals of Britannia's desperate measures to make ends meet without enslaved populations. Off-shore bank accounts in British royals' banks to the very gut of the ongoing LIBOR fraud in London, with help from treasonous American cult social groups of the Anglophile nature, the Rothschild's prancing and mewling American congress, and the Ministry of Unnatural Acts in the White House. Time to clean up.

[diane taylor]

It would stand to reason that the largest companies in numerous industries, say banking, wouldn't need taxpayer help at all. However, the alternative is apparently the case as a Bloomberg report recently found the larger they are the bigger the bank subsidy, on the taxpayer's dime no less. Taxpayers are paying huge personal loans to pay banks. wwwpersonalmoneynetwork.com/personal-loans

[diane taylor]

It would stand to reason that the largest companies in numerous industries, say banking, wouldn't need taxpayer help at all. However, the alternative is apparently the case as a Bloomberg report recently found the larger they are the bigger the bank subsidy, on the taxpayer's dime no less. Taxpayers are paying huge personal loans to pay banks. Source for this article: https://personalmoneynetwork.com/personal-loans

[john]

Here is a cool tool to find out who has been getting what:

Subsidy 3.0

http://www.goodjobsfirst.org/subsidy-tracker

[skinflint]

Not bragging, but Maryland got off easy on this one.