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New York Fed Research Shows Too-Big-To-Fail Funding Advantage

Reports find nation’s largest banks enjoy subsidy because of taxpayer-funded backstop

Washington, D.C. (March 25, 2014)—The Independent Community Bankers of America® (ICBA) released this statement on Federal Reserve Bank of New York reports released today showing that the nation’s largest banks enjoy a cost advantage because they are considered too big to fail.

The reports released today from the New York Fed are the latest in a long line of studies to conclude that our nation’s largest financial firms enjoy a funding advantage over their smaller competitors because they are considered too big to fail. 

The too-big-to-fail advantage is the unfair result of investor perceptions that the federal government would use taxpayer funds to prevent the largest financial institutions from failing. This government guarantee distorts our financial markets, exacerbates systemic risks to our financial system and economy, and exposes taxpayers to additional bailouts of the largest megabanks.

That is why ICBA continues to support the Terminating Bailouts for Taxpayer Fairness (TBTF) Act (S. 798), introduced by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.), which would require the largest and riskiest banks to hold more leverage equity capital to reduce their risks and avoid future taxpayer bailouts.

Greater protections against future systemic crises and a more diverse financial system would help mitigate our nation’s financial risk while promoting competition, innovation and the availability of credit to consumers and businesses.

About ICBA
The Independent Community Bankers of America®, the nation’s voice for nearly 7,000 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.

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