On October 1, 2009
What do Banks Gain From Being Too Big to Fail?
Of the U.S. financial companies the federal government has decided are “too big to fail,” how much of their 2009 profits owe to being able to borrow funds more cheaply than smaller lenders? More than is commonly thought, concludes the Center for Economic and Policy Research. For a banking giant like Wells Fargo, it can amount to as much as one-quarter of the company’s $18.7 billion in profits reported through the second quarter. For Bank of America, it may account for 46 percent, while more than all of Capital One’s earnings may derive from this indirect subsidy, according to the Washington think tank (click on chart to expand). Because they’re effectively backed by the full faith and credit of the…
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