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Dodd-Frank Failing to Prevent ‘Too Big to Fail?’

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  • Description

    FBN’s Gerri Willis on the impact of Dodd-Frank legislation.

  • Duration 2:34
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Well every once in awhile -- have to say I told you so and this is one of those -- it's.

As we've been saying on the show for some time now the Dodd-Frank -- -- which we wrote the regulatory rule book for banks did nothing to get rid of too big to fail.

That of course is the the implied promise the big banks will get bailed out if they get in trouble just like they did during the financial crisis using your money by the way.

In fact you researchers have actually pinned down what that promise means to banks.

As some city of 83 billion dollars a year.

Now here's the -- Big banks nearly a full percentage point less and borrowing costs are interest rates because they are backed by the federal government.

If anyone of the big banks were to go bus the government would face enormous pressure to step in and keep the bank going you know how that is.

That interest rate discount applied to everything banks' liabilities.

Even customer deposits and that one little percentage point.

Well makes a whale of a difference.

Multiply that amount times the total liabilities of the ten largest banks and you get Al whopping 83 million dollars a year.

Which according to the researchers is akin to giving the banks three cents out of every tax dollar collected think of that three cents out of every tax dollar collected.

Now most of the benefit is going to just by banks the big ones you know them JPMorgan Chase Citigroup Wells Fargo Goldman Sachs and Bank of America.

-- take that subsidy away well you might as well take away their profitability.

-- other words this benefit is keeping the whole sector afloat.

Our money.

Today the senate got in on the action asking Fed Chairman Ben Bernanke why we did such a -- to the sector here's what two of them had to say.

Should those biggest financial institutions be repaying the American taxpayer.

That 83 billion dollar subsidy that there can't.

My top concern is actually exactly the same as mrs.

Warren's that there is growing.

Bipartisan.

Concern.

Across the whole political spectrum.

About the fact I believe it's a fact that too big to fail is alive and well.

What -- staying.

Is that one of the senators is the leftist of the left Elizabeth Warren and -- bidder is a super conservative.

And that should tell you something when the hard right and -- hard left agree on something they may have a point the government needs to get out of the business of guaranteeing the business of banks.

We just can't afford it.

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