Study: Mega Bank JP Morgan Chase Receives A $14 Billion Annual Subsidy From The U.S. Government

http://thinkprogress.org/economy/2012/06/19/502311/study-jp-morgan-subsidy/?mobile=nc

By Pat Garofalo on Jun 19, 2012 at 2:50 pm

JP Morgan Chase CEO Jamie Dimon testified on Capitol Hill today for the second time in two weeks, appearing before the House Financial Services Committee to discuss the trading debacle that has cost his bank billions of dollars. Before the hearing, Bloomberg News pointed to a new study showing that JP Morgan Chase receives a $14 billion annual subsidy from the U.S. government. This subsidy is due to JP Morgan’s reputation as a too-big-to-fail bank, which lets it borrow money at lower rates than other, less systemically risky banks:

JPMorgan receives a government subsidy worth about $14 billion a year, according to research published by the International Monetary Fund and our own analysis of bank balance sheets. The money helps the bank pay big salaries and bonuses. [...]

In a recent paper, two economists — Kenichi Ueda of the IMF and Beatrice Weder Di Mauro of the University of Mainz — estimated that as of 2009 the expectation of government support was shaving about 0.8 percentage point off large banks’ borrowing costs. That’s up from 0.6 percentage point in 2007, before the financial crisis prompted a global round of bank bailouts.

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