This study concludes that taxpayers cover a $5 billion dollar default insurance payment for each big bank.
We use bank stock returns to develop an ex-ante measure of the distortion created by the implicit collective guarantee extended to large U.S. financial institutions. The average return on a stock portfolio that goes long in the largest U.S. commercial banks and short in the smallest banks is nearly minus 8% compared to a portfolio of non-bank stocks and bonds with the same exposure to standard risk factors.
Why do we subsidize big banks at this rate? Because Michelle Bachman and the Tea Party want to sign onto the biggest deficit in history. That kind of borrowing needs the big banks to cover the shorts. See, every time one of these supposed conservative Republicans rule, it is the same old thing, borrow and more socialism.
Ever since Reagan, Congress has been dependent on Big Banks for debt management. This is Michelle Bachmann style socialism, and the Tea Party will not survive this lunatic Communist running loose among them.
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