How much are the taxpayers subsidizing too-big-to-fail banks, if not $83 billion per year?
There’s been lots of controversy over the Bloomberg editorial I wrote about a few days ago. The article, which is here, used an IMF study to do a back-of-the-envelope calculation on how much the yearly taxpayer subsidy is for the too-big-to-fail banks.
Since then, there have been lots of people coming out of the woodwork complaining about their interpretation of the paper, about their assumptions, and about the result. I also had someone doing that on my comments, which I appreciate.
Then, more recently, Bloomberg doubled down on their original number, which is exciting stuff in the world of wonky modeling.
Here’s where I am:
- This question is important- possibly the most important question about the current financial system, as it relates to the average taxpayer. Wouldn’t you want to know how much something you’ve bought costs?
- And I’m absolutely smitten by the Bloomberg editorial staff for raising the question and coming out with a model and an answer.
- That doesn’t mean it’s perfect. They were relatively sloppy (but not as sloppy as some people claim).
- I’m no expert either, but I’m absolutely intrigued by this question and the possible answers.
- But since I’m a modeler, I know it’s a lot easier to push over a model by complaining about an assumption than it is to come up with a better model that doesn’t make such stupid assumptions.
- So anyone who complains should also offer an alternative.
- Because we need to know the answer to this, and since there’s not one answer, we need to have this argument, publicly.
- And after all what’s the point of modeling if we can’t answer this?
One more thing. Matt Levine at Dealbreaker has come up with his own model, here, but I’m not sure it’s more convincing than Bloomberg’s. In particular his conclusion is that TBTF banks actually subsidize us (not really).
So what is it? Where’s your model?
We need this public discussion and we need thoughtful arguments about the existing models. Let’s do this!