I am shocked. Shocked, I tell you.
From Australian ABC News: “Billions in hidden subsidies going to too-big-to-fail banks.”
As the first round of submissions to the Federal Government’s Financial Systems Inquiry closed this week there was a timely reminder that the fundamental cause of the global financial crisis is still deeply embedded in the banking system.
The world’s wealthiest and most powerful banks still operate behind the shield of being “too-big-to-fail” (TBTF), an issue that former US Federal Reserve chairman Ben Bernanke fingered as a major factor in the meltdown and the ensuing economic calamity that still haunts markets and economies worldwide.
Both the International Monetary Fund and the Fed have just published studies showing that, not only did the TBTF policy encourage a coterie of banks to place bigger and riskier bets, it is the taxpayer who largely underwrites the whole operation.
You mean to tell me that bankers who know they’ll be bailed out with taxpayer’s money take even more risks than those who might sink their bank?
On the question of behaviour and the interaction of ratings agencies, the Fed study is fairly blunt.
“The results show … that a greater likelihood of government support leads to a rise in bank risk taking,” the report concluded.
The IMF study, published this week, found something similar, but managed to put some numbers on the cost to taxpayers.
The big banks in the US were subsidised by up to $US70 billion in 2012. In Europe it was up to $US300 billion and in the UK and Japan up to $US110 billion.
Globally, the IMF says the TBTF subsidies are provided in a variety forms, from loan guarantees to direct cash injections.
That insurance policy allows the big banks to borrow at far lower rates than their less protected smaller rivals.
As the IMF notes, “those lower funding costs represent an implicit public subsidy to large banks.”
Let me try it again: Bankers who can make bigger bonuses for their “winnings,” and face few or no consequences for blowing things up, will be irresponsible? I mean, who possibly could have guessed such things?
Looks like banks are showing they really are an extension of government: unending theft, and never a problem suffered for being incompetent or downright criminal.