Taxpayers Giving Biggest Banks $83 Billion Per Year

How fortunate that banks like JPMorgan have all of us generous taxpayers giving such lavish gifts each year!

Did you know that taxpayers like you and me are obliged to give approximately $83 million to the big banks every year?

According to Bloomberg, CEOs of these banks have told the public that this money allows them to “lower costs and vie customers on an international scale.” Cutting back on these “taxpayer donations” would hurt their profits and weaken the country's dominant position in to international financial realms – or so they say... 

Well of course, they have to validate receiving all that money from us by saying it's good for something. Meanwhile, skeptics assert that the “largest” banks in our country aren't necessarily the most profitable at all. The billions of dollars given to their shareholders each year is scarcely money those banks have “earned”; it is almost entirely comprised of taxpayer money.

This problem alone poses a serious threat on our economy – not just America's economy, but the whole world's economy. But the greedy bankers have little incentive to do anything about this dilemma, so long as the money keeps flowing their way.

However, if this situation isn't soon remedied, superbanks could require future bailouts that exceed the government's resources. Sound familiar?

You'd think that the financial meltdown of 2008 and the bailouts that soon ensued would have taught the banks a critical lesson in finance. Unfortunately, many are too self-absorbed to think of the long-term consequences of such reckless behavior.

From Bloomberg:

Regulators can change the game by paring down the subsidy. One option is to make banks fund their activities with more equity from shareholders, a measure that would make them less likely to need bailouts (we recommend $1 of equity for each $5 of assets, far more than the 1-to-33 ratio that new global rules require). Another idea is to shock creditors out of complacency by making some of them take losses when banks run into trouble. A third is to prevent banks from using the subsidy to finance speculative trading, the aim of the Volcker rule in the U.S. and financial ring-fencing in the U.K.

Once shareholders fully recognized how poorly the biggest banks perform without government support, they would be motivated to demand better. This could entail anything from cutting pay packages to breaking down financial juggernauts into more manageable units. The market discipline might not please executives, but it would certainly be an improvement over paying banks to put us in danger.