The Value of the “Too Big to Fail” Big Bank Subsidy

Dean Baker · Travis McArthur

68 citations0/0 files storedRePEc: Research Papers in Economics

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Banking stability, regulation, efficiency Global Financial Regulation and Crises finance, banking, and market dynamics

Abstract

One outcome of the TARP and other bank rescue efforts following the collapse of Lehman Brothers in September of 2008 is that the United States has essentially formalized a commitment to a "too big to fail" (TBTF) policy for major banks. This paper uses data from the FDIC on the relative cost of funds for TBTF banks and other banks, before and after the crisis, to quantify the value of the government protection provided by the TBTF policy.

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2013The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes 2012Corporate Governance of Financial Institutions 2014Do "Too-Big-to-Fail" Banks Take on More Risk?2010Sudden Financial Arrest 2010Redefining and Containing Systemic Risk 2020Equity Is Cheap for Large Financial Institutions 2012Size, Leverage, and Risk-Taking of Financial Institutions 2016Deposit Rate Advantages at the Largest Banks

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