The first-ever analysis of the taxpayer-subsidy to the Wall Street mega-banks finds that this subsidy accounts for virtually all their profits. Applying figures from a path-breaking study by two IMF economists, Bloomberg News has calculated that the annual subsidy received by America’s mega-banks, from our Government’s special treatment of them as “Systemically Important Financial Institutions” (i.e., fully guaranteed by U.S. taxpayers, irrespective of the normal $250,000-per-account limit in savings and checking accounts), is $83 billion, of which $64 billion goes to just the five largest banks.
Bloomberg News posted this news in a stunningly uncharacteristic editorial on Wednesday, “Why Should Taxpayers Give Big Banks $83 Billion a Year?” which was based upon their analysis of the figures in a widely ignored but rigorous study by IMF economists, a study that had been issued months back, in May 2012, and which was titled “Quantifying Structural Subsidy Values for Systemically Important Financial Institutions.” As Bloomberg’s editors summarized it: “The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail,” due to the Government backing. The taxpayer-funded annual subsidy to these TBTF banks has never before been calculated as to its actual dollar-value, but this rigorous IMF study provided the means for doing that. Bloomberg’s says, “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?”
“The top five banks – JP Morgan, 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.”
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In other words: Obama, Geithner, Bernanke, Greenspan, Paulson, Bush, etc. had been siphoning hugely, every year, from U.S. taxpayers, transferring that much into the accounts of the top executives and stockholders of the mega-banks, and had produced the 2008 crash and its aftermath as a result, and yet this subsidy is continuing, in the American kleptocracy or plutocracy (which is called “capitalism,” a “free market,” and a “democracy”). The finding suggests that the U.S. might be a crony-capitalism, but hardly a capitalism. The reader-comments that are posted online to the Bloomberg editorial are mainly in denial, but none of the commentators can override the reality, which Bloomberg editors and IMF economists calculated with care. Conservatives – supporters of the status-quo – refuse to recognize that we live in a kleptocracy, and they refuse to understand how and why their conservatism is an important part of the support-system for this Robin-Hood-in-reverse society in which we live.
Because Wall Street’s Mayor Michael Bloomberg made his roughly $20 billion fortune by serving the mega-banks, this editorial from Bloomberg News constitutes remarkable news, in and of itself.