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

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Author Info

  • Dean Baker
  • Travis McArthur

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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File URL: http://www.cepr.net/documents/publications/too-big-to-fail-2009-09.pdf
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Bibliographic Info

Paper provided by Center for Economic and Policy Research (CEPR) in its series CEPR Reports and Issue Briefs with number 2009-36.

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Length: 5 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:epo:papers:2009-36

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Keywords: Federal Reserve; Treasury; banks;

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Cited by:
  1. Bank for International Settlements, 2011. "The impact of sovereign credit risk on bank funding conditions," CGFS Papers, Bank for International Settlements, number 43, January.
  2. Josh Bivens & Lawrence Mishel, 2013. "The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 57-78, Summer.
  3. Doluca, Hasan & Klüh, Ulrich & Wagner, Marco & Weder di Mauro, Beatrice, 2010. "Reducing systemic relevance: A proposal," Working Papers 04/2010, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
  4. Edward Kane, 2010. "Redefining and Containing Systemic Risk," Atlantic Economic Journal, International Atlantic Economic Society, vol. 38(3), pages 251-264, September.
  5. Xiaoqiang Cheng & Patrick Van Cayseele, 2009. "State Aid and Competition in Banking: the Case of China in the Late Nineties," LICOS Discussion Papers 25009, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  6. Günther, Susanne, 2013. "Eine ökonomische Analyse der Systemrelevanz von Banken," Arbeitspapiere 139, Westfälsche Wilhelms-Universität Münster (WWU), Institut für Genossenschaftswesen.
  7. Kane, Edward J., 2012. "Missing elements in US financial reform: A Kübler-Ross interpretation of the inadequacy of the Dodd-Frank Act," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 654-661.
  8. Edward Kane, 2010. "The Importance of Monitoring and Mitigating the Safety-Net Consequences of Regulation-Induced Innovation," Review of Social Economy, Taylor & Francis Journals, vol. 68(2), pages 145-161.

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