FOR IMMEDIATE RELEASE
New GAO Report Confirms Too-Big-To-Fail Exists, Taxpayer Subsidy Continues
Washington, D.C. (July 31, 2014)—The Independent Community Bankers of America® (ICBA) today highlighted the results of a new Government Accountability Office (GAO) report examining the too-big-to-fail subsidy. The report also details the various government-assistance programs that were used to assist the nation’s largest financial institutions after they ushered in the worst financial crisis since the Great Depression.
“We now know what we’ve known all along—that the largest and riskiest financial firms have a competitive advantage in the marketplace because they can access subsidized funding more cheaply than smaller financial firms while leveraging their too-big-to-fail government backing,” ICBA President and CEO Camden R. Fine said. “A subsidy, is a subsidy, is a subsidy and today’s GAO study proves that there is indeed a taxpayer subsidy associated with too-big-to-fail.”
The report clearly demonstrates the value of the too-big-to-fail subsidy and how the ongoing subsidy varies substantially over time. The subsidy's value is less in relatively stable time periods, and increases and becomes more valuable in periods of stress—meaning that the value of being too-big-to-fail increased significantly during the financial crisis, and will again in future crises.
“This Wall Street taxpayer subsidy and risk must be stopped immediately because it will only get bigger when the next crisis arises—and the question is when rather than if,” Fine said. “Today’s GAO study is yet another example of a host of studies that determine there is a clear taxpayer subsidy that must be dealt with before it is too late. The IMF recently pegged the subsidy at more than $80 billion. We have the ability to control America’s economic safety by ending too-big-to-fail now. We would be remiss if we stand back and do nothing.”
That is why ICBA supports real reforms to tackle too-big-to-fail, such as the Terminating Bailouts for Taxpayer Fairness (TBTF) Act (S. 798), introduced by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.). The TBTF Act would require the largest and riskiest banks to hold more leverage equity capital to reduce their risks and avoid future taxpayer bailouts.
ICBA will continue to work with Congress and financial regulators to address the problematic too-big-to-fail subsidy. For more information about too-big-fail and its impact on our economy, click here.
The Independent Community Bankers of America®, the nation’s voice for more than 6,500 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services.