Who's in the mood for a little thought exercise today? Because I came across this Bloomberg piece that claims Wall Street banks get an $83 billion annual taxpayer subsidy and, when you look at it the way they do, it's hard to disagree. The piece further states that the 10 largest banks in America wouldn't even break even without it, so essentially all the comp from bottom to top is a taxpayer handout.
There are a couple of things you have to accept for this to make sense. First, you must acknowledge that Too Big To Fail is enshrined in our policy now, thereby eliminating the vast majority of risk to bank bondholders. Obviously, with minimal risk comes a decreased borrowing cost (or government subsidy, if you will) which the IMF has pegged at 80 basis points.
When that discount is applied to the total liabilities of the 10 largest American banks, it results in an $83 billion taxpayer subsidy (because the banks' safety net is the implied backstopping by US taxpayers). Put another way, without this subsidy America's top banks would barely break even, and some would even lose money.