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Bailouts Forever

By Joseph Lawler on 6.6.11 @ 11:43AM

At the Washington Examiner, Tim Carney explains that the Dodd-Frank financial regulation bill has led to taxpayer subsidization of the biggest banks:

The implicit government guarantee these banks enjoy is a subsidy. The "five notches of uplift from government support assumptions" that Moody's gives to Bank of America translate into real profits for Bank of America. Without a presumed bailout, Bank of America's senior debt would be rated Baa3, just barely on the right side of the "Investment Grade"/"Speculative Grade" boundary. The presumed "government support" raises the bank's debt rating to A2, which is "very low credit risk." Even Wimpy from "Popeye" would be a "very low credit risk" if you could count on Ben Bernanke and Tim Geithner to pay for his hamburger.

As a result, all the big banks pay lower interest rates than they would pay in a market environment. Put another way: Anyone lending money to big banks (by buying their bonds, for instance), does so on the assumption that if the bank cannot repay the loan, U.S. taxpayers will. It's hardly shocking that experts think our recently bailed-out and very politically connected banks are still too big to fail, but the Moody's report makes it official.

View all comments (5) | Leave a comment

PattyMor| 6.6.11 @ 1:11PM

That's why they showered a bucket full of money to elect the 'Bamster. And they will do so again. They have the best of all worlds, privatized profits and socialized losses. Heads they win, tails the taxpayer loses.

Warrior| 6.6.11 @ 2:36PM

Unfortunately, W started the bailout marathon. Please also remember that there were enough Republicans in the senate to stop the Dodd/Frank raping and yet it passed anyway. Both parties are out of control. The only reason the RINOs make any noise about these things is so that they can have election footing. They are actually not trying to stop anything.

axbucxdu| 6.6.11 @ 11:17PM

The bailouts are chump change compared to the advantage they continue to enjoy at obtaining reserves interest free from guess who, yup, the Fed.

Yes, indeed! Drinks all around for this dim species, boobus Americanus! Hear! Hear! As glasses all clink...the government pays them to make money...and where are the clowns, the Rethugs, to protect the Republic? In it too with both hands, that's where...

Al Adab| 6.6.11 @ 4:13PM

Which enumerated power is that? Does it say somewhere "Congress shall have the power to decide from whom to take money and to whom they may cede it"?

Shall Congress shall have the power to decide which favored groups or companies get taxpayer dollars and which taxpayers shall be penalized by paying a higher percentage of their income than other citizens?

axbucxdu| 6.6.11 @ 11:05PM

At least Carney's article led off with the name (GS) of the vampire squid. On the other hand, the smartest guys in the room (JPM) don't even rate a mention. The primary perpetrators of this mess need to be named, and named repeatedly, not only in the press but, say on toilet tissue and cans of deodorant.

The only thing worse is Rethug Gregg's feeble and idiotic comments protecting the scheisters. Republicans, yeah right, do they even know how to spell Republic?