« Usury and the Loan Shark Myth | Main | Ironicality Alert »

TBTF or Maybe WT-?

posted by Stephen Lubben

So the financial industry got a surprising amount of press over their obviously ridiculous statement that too big to fail no longer exists. Thankfully most saw this for what it was.

If I announced that bankruptcy professors are underpaid would the press cover that too?

But the actual claim made in press release is pretty interesting and easily overlooked. The bankers assert

since the passage of Dodd-Frank, any cost of funding advantage has been dramatically reduced or even eliminated.  In fact, two recent studies conclude that markets are now imposing a cost of funding premium on large banks of up to 35 basis points.

Read closely, the first sentence means (a) "we still get a subsidy, just not so much as before" or (b) "somehow Dodd-Frank precisely eliminated our subsidy without going too far, who knew Congress could be so precise?"

Or perhaps the second sentence suggests that Congress was not so precise after all?  That is, does the funding premium (if it really exists – Bloomberg casts doubt on that) suggest the business model of TBTF is no longer viable ... oh dear, better not say that in the press release!

Comments

The comments to this entry are closed.

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF