Why Congress needs the TBTF banks

Moody’s on Monday said in its “Weekly Credit Outlook” that the Treasury Department’s planned sale of its 7.7 billion shares of Citigroup this year doesn’t mean the government would remove its implicit support of the company if Citigroup were to fall into trouble again.

“The likelihood of government support remains very high because of Citigroup’s systemic importance to the U.S. and global financial system as a major counterparty, payments and clearing agent, deposit taker, and provider of credit,” Moody’s said. This is important, because Moody’s said it doesn’t see any “”rating implications from the disposition of the government’s 27% stake in the company.” In other words, Citigroup can still continue issuing debt at levels that assume a type of government support.

It is Congress which is too big to fail as they direct trillions of new debt creation. Absent the big banks, Congress would never be able to produce such debt.