Mathbabe
- This question is important- possibly the most important question about the current financial system, as it relates to the average taxpayer. Wouldn’t you want to know how much something you’ve bought costs?
- And I’m absolutely smitten by the Bloomberg editorial staff for raising the question and coming out with a model and an answer.
- That doesn’t mean it’s perfect. They were relatively sloppy (but not as sloppy as some people claim).
- I’m no expert either, but I’m absolutely intrigued by this question and the possible answers.
- But since I’m a modeler, I know it’s a lot easier to push over a model by complaining about an assumption than it is to come up with a better model that doesn’t make such stupid assumptions.
- So anyone who complains should also offer an alternative.
- Because we need to know the answer to this, and since there’s not one answer, we need to have this argument, publicly.
- And after all what’s the point of modeling if we can’t answer this
How much are the taxpayers subsidizing too-big-to-fail banks, if not $83 billion per year?
Cathy O'Neil
7 comments:
I get a bit fed up with this 'subsidising banks' line. It's complete crap.
Banks are middlemen. They take the cost of their 'funding', add a markup and lend it out.
So what you're actually subsidising is the lending out bit.
And you're doing that because the rhetoric is that private leveraged lending via commercial banks is more 'efficient' than the central bank lending to government and them doing the initial spending injection.
Right Neil and perhaps to your point Elizabeth Warren brought this same 83B issue up in her questioning of BB the other day...
But here is where Warren goes out of paradigm: She asked BB "Should we require the big banks to "return this money to the taxpayers?" ... this is an absurd statement...
She should have said something like: "Should we increase bank fees to large banks by 83B in order to remove this, in-effect, unappropriated federal subsidy to these large institutions?"
This use of the phrase "return to taxpayers" is damaging in itself.. it implies that it is "the taxpayers money" in the first place...
rsp.
Right. Discourse would be better focused on regulation - of margins, practices and shady behaviors - not on throwing out the baby with the soiled bathwater.
And I would point out that according to Bernanke NO bank is any longer TBTF....
So according to Bernanke, the 'TBTF' acronym is no longer needed in the lexicon.... He said 'he now has the tools'.... Uh oh!
Rsp
This use of the phrase "return to taxpayers" is damaging in itself.. it implies that it is "the taxpayers money" in the first place...
This is political rhetoric. Instead of "taxpayers," read "voters." She is talking about a clawback, and there are a lot of ways to do that. The public is not interested in the details. They see money that "we don't have" going to someone other than themselves, and in a way that is true the way the game is now structured.
Neil, so there needs to be more public credit/money creation/net spending and less private.
An additional problem is that bank middlemen are well-placed institutionally to cream/syphon off and accelerate socio-political economic entropy.
Neil, so there needs to be more public credit/money creation/net spending and less private.
An additional problem is that bank middlemen are well-placed institutionally to cream/syphon wealth and thereby accelerate socio-political economic entropy.
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