Subsidizing the Zombie Banks to the Tune of $780 Billion Dollars Annually While Making Granny Eat Cat Food

Newly elected Sen. Elizabeth Warren was in the news for confronting the Banksters on their receipt of over $80 billion dollars a year in Federal Government subsidies to keep them above water.

Seems on close examination that estimate is a tad short, say about $700 BILLION DOLLARS short of the actual mark. Remarkably, the actual level of subsidies to the Too Big to Fail Banksters almost exactly matches the size of the fiscal stimulus passed in 2009 to try and shore up the economy for the rest of us Plebs and workers out here in America: $787 billion dollars.

But all I recall hearing from Congress on that was bitching and moaning and whining that this egregious socialism would destroy America, that that was wasted money for a supposedly failed stimulus, and that the American people should just suck it up and go get a job at McDonald’s, or pave their own roads, or put out their own house fires.

Of course I keep hearing Granny will need to eat cat food to save Social Security, because we need $2 trillion dollars to make Social Security solid for the next 75 years. Oh, that would be what we are shoveling down the gaping, greedy maw of these criminal banks every three years. But that’s OK, apparently.

Because Congress has no problem at all, it seems, with providing massive, ongoing corporate welfare to the banks, without which, not only would they not be experiencing profits, nor paying out their congratulatory massive bonuses to their CEOs and top level people, they would probably be collapsing into the bankruptcy and failure they fully deserve for being the crooks they are, who are surviving only by sucking on the Federal Government’s teat. I could add more detail on how we are subsidizing other massive profitable industries, like Big Oil and GE, which paid NO taxes by hiding assets abroad, but we will just stick to the Banksters for now.

The real tragedy is that we have a Democratic President, Obama, elected to a second term, by an American people who want a second FDR to save the programs that insure Americans do not die in old age in abject poverty and without healthcare, not a man who seems intent on outdoing the GOP in bowing to and doing the will of the the rich, the elite, and the corporations.

Many Americans and members of the Democratic Party are finally waking up to the fact that “Obama Is Worse than Bush In Favoring the Super-Elite, Bailing Out the Big Banks, Protecting Financial Criminals, Targeting Whistleblowers, Keeping Government Secrets, (and) Trampling Our Liberties.” Even Democratic Party Loyalists Starting to Wake Up to the Fact that Obama Is As Bad As Bush … Or Worse

Analyst Chris Whalen of does an analysis, and shows that the banksters are sucking down the equivalent of at least $780 billion a year from the Federal Government, and by that I mean, the American taxpayers.

Whalen goes into a point by point specific analysis of the precise nature and magnitude of these subsidies.

Last week, Senator Elizabeth Warren (D-MA) incurred the ire of the banking industry by suggesting that their cost of funds is subsidized to the tune of $80 billion annually. Bloomberg News reports:

“Warren questioned Fed Chairman Ben S. Bernanke over what she said was a taxpayer subsidy worth $83 billion, citing an International Monetary Fund working paper on the funding advantage big banks get because of the market perception that they are protected by the government against failure. In their brief, the industry groups said the paper cited by Warren used data on banks’ borrowing costs before Dodd-Frank was passed.”

Unfortunately, neither Senator Warren nor the folks at the IMF have a full appreciation for the scope of the subsidies that run through the P&Ls of the US banking industry and, in particular, the top-four zombie banks — C, WFC, BAC and JOM — which account for more than two-thirds of the total assets in the industry. And you don’t need to count any of the emergency programs and subsidies put in place after the 2007 subprime crisis in order to understand the subsidy flows to the zombie dance queens.

Question for Liz Warren: How Many Subsidies Does a Zombie Bank Need?

The analysts at break down the details from Whalen’s piece for point by point consumption as follows:

$360 billion in Federal Reserve subsidies, by creating an artificial “spread” in interest rates (Bloomberg, Business Insider, Huffington Post, and many other publications have documented that the government is subsidizing big banks with artificial and guaranteed “spreads”, where the banks borrow cheaper than any consumer can, and then lend the money back to the government at much higher interest rates.)

$120 billion in federal deposit insurance (through the FDIC, backed by the Treasury)

At least $100 billion in government-guaranteed loans, especially mortgages

At least $100 billion in monopolistic advantages in the secondary market for home mortgages. Specifically, the government subsidies the big banks to steal away fees earned from smaller banks, gain on sale into the TBA market and servicing. Whalen quotes a veteran banker explaining:

The smaller players lived on the bleeding edge of the mortgage market, but they were also far more efficient lenders than the large banks. Now, care of the Fed, we have a highly inefficient oligopoly in the US mortgage market that is built around the largest banks.

More than $100 billion in fees in the over-the-counter (OTC) derivative market. Whalen explains

The lack of capital required in these transactions and other special dispensations from the Fed provide the zombie banks with unlimited leverage and almost no public scrutiny. The fact that OTC contracts are exempt from the automatic stay in bankruptcy is a huge subsidy. The bilateral market structure is another.

That totals $780 billion per year.

Top Banking Analyst: Subsidies to Giant Banks Exceed $780 Billion Dollars Per YEAR

As if that is not bad enough, Whalen points out further:

The above points are only a partial list of the subsidies and other flows that allow the members of the banking industry to pretend to be profitable, risk-taking organizations in a free market economy.

The American people get what they vote for, and for decades, they have voted for members of Congress whose allegiance, it turns out, is not to the American people, but to the top 20%, or even just the 1%, and to the Corporate Oligarchy who have taken control of this nation’s economy, its Congress, and it media.

Criminal activity was rampant in the banking and housing and mortgage industry, leading to the financial crisis and collapse of 2008. And to this day, not only has there been not one single CEO or member of those criminal enterprises held accountable, the Federal Government continues to MASSIVELY SUBSIDIZE this class of modern day Robber Barons. Actually, it is an insult to the Robber Barons of the end of the 19th century to compare them to today’s crooked Banksters and corporations. The Robber Barons were patron saints compared to these criminals today.

And Congress does nothing to address this, much less stop it. Is it any wonder that the American People give Congress their lowest ratings in the history of the Republic?

As for Obama’s laughing stock of an Attorney General, Holder? He admitted in testimony before Congress recently that it is just to darned hard to prosecute the crimes of the Too Big to Fail Banks, so he and the DOJ just cannot be bothered with even trying.

On Wednesday, March 6, US Attorney General Eric Holder testified before the Senate Judiciary Committee, admitting that the Department of Justice believes that Wall Street financial titans are too big to jail. According to the American Banker,

Holder told the Senate Judiciary Committee that the size and interconnectedness of some institutions has “made it difficult for us to prosecute” in some cases, in response to a question from Grassley, the panel’s lead Republican, about the HSBC deal.

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute — if we do bring a criminal charge — it will have a negative impact on the national economy, perhaps even the world economy,” said Holder, who cautioned he was speaking generally and not about the HSBC case specifically. “I think that is a function of the fact that some of these institutions have become too large.” (Italics added by BuzzFlash at Truthout.)

Addressing bank size is something lawmakers in Congress would “need to consider,” he added.

In essence, the chief law enforcement officer of the United States conceded that he cannot uphold laws governing financial fraud and manipulation in regards to those who run large financial entities. His argument is that holding individuals criminally accountable for imploding the economy would endanger the economy. Say what? Isn’t Holder just giving them further license to plunder away?

Holder Admits That Department of Justice Believes Big Bankers Are Above the Law

Of course the tragedy is that when it comes time to go to the ballot box, the American People keep voting these same dysfunctional and failed members of Congress back into office.

And the ongoing collapse of the American Economy and Dream continues apace.

One final quote from Sen. Warren to illustrate the upside down craziness of our current political and social order, and all that is wrong with it:

“If you’re caught with an ounce of cocaine, the chances are good you’re going to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night.”

Elizabeth Warren Confronts the Atrocity of Drug Money Laundering by Big Banks


Author: Ron