Is Measuring the TBTF Subsidy a Distraction?
American Banker (subscription required)
Cornelius Hurley, School of Law, Center for Finance, Law & Policy
Are the nation’s biggest banks still receiving government subsidies six years after the crisis? Two recent studies by the Federal Reserve and the International Monetary Fund suggest that globally systemically important banks benefit from implicit subsidies because the market believes they will be bailed out in the event of a crisis…
“A subsidy prevents normal governance from taking place. It serves as a poison pill and as disincentive to divestitures by making all too-big-to-fail assets worth less outside the TBTF womb.”