Elizabeth Warren to Ben Bernanke: Big Banks Should Pay for Being Too Big to Fail

not an end the fed-erC-SPANIt’s not quite “let them eat cake” to the “too big to fail” banks, but Senator Elizabeth Warren (D-Mass.), the newest member of the Senate Banking Committee, put the press to Ben Bernanke on the Federal Reserve’s implicit guarantee of a bailout to “too big to fail banks” at committee hearings this week. Warren pointed to a recent piece from Bloomberg that valued the discount big banks get to borrow at $83 billion a year. Asks Bloomberg:

So what if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?

Granted, it’s a hard concept to swallow. It’s also crucial to understanding why the big banks present such a threat to the global economy.

Let’s start with a bit of background. Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail.

Warren asked Bernanke why banks shouldn’t pay for this implicit subsidy, to which the Federal Reserve chairman responded “I think we should get rid of it.” He didn’t clarify, naturally.

Video below:

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  • John||

    How low do you have to be to make fauxcahauntus look good? Bernarke really might be the worst public official in American history.

  • fish||

    No shit...make them fight to the death and hope they both lose!

  • Brandon||

    Give them both knives with poisoned blades.

  • Killazontherun||

    Make them play cup flip while drinking poisoned beer.

  • ||

    How does a junior senator immediately get onto the Banking Committee? I hate Congress so much.

  • BarryD||

    Maybe the Banking Committee isn't a particularly sought-after post any more...

  • ChrisO||

    Banking isn't a prestige committee, since it's not tied to appropriations or to chest-puffing foreign relations stuff It's a bunch of wonk shit that nobody back home understands or cares about.

  • ||

    Wait a second, Warren is on the right track about something? Does she have a goatee? Where's my Tantalus Device?

  • ||

    I'll take Barbara Luna, you can have SugarFree as your Captain's Woman.

  • ||

    He's the Captain's woman until I say he isn't.

  • SugarFree||

    You just don't hit me enough, pussy.

  • ||

    (backhands NutraSweet)

    Go fetch me a turkey pot pie!

  • SugarFree||

    I'm going to go find myself a real man, Carlo.

  • ||

    Bitch.

  • John||

    I will take Ensign Rand for the win.

  • ||

    God it was so easy to distract you two idiots into not taking Sherry Jackson, who I now claim.

  • John||

    Wow.

  • ||

    It's Yeoman Rand.

  • John||

    I thought she got promoted.

  • Bardas Phocas||

    Only James Kirk gets promotions in Star Fleet.
    And he doesn't get a party.

  • Rasilio||

    Screw that I want Ensign Robin Lefler, even if she did grow up to be a leftie

  • Fist of Etiquette||

    Somehow you need to work Miramanee into the mix.

  • ||

    Don't be daft. Edith Keeler.

  • Fist of Etiquette||

    BECAUSE SHE'S A NATIVE SPACE AMERICAN, IDIOT.

  • ||

    Uh, two words for you, you drooling nincompoop: Joan. Collins.

  • Fist of Etiquette||

    OMG I know that. I'm saying it's a story about Elizabeth Warren so you have to work in the Space Injuns episode.

  • SugarFree||

    Me use'em heap big dilithium crystal.

  • ||

    We were talking about Elizabeth Warren? I thought we were talking about Star Trek.

  • SugarFree||

    ELIZASTAR WARTREK!

  • Fist of Etiquette||

    You're making a mockery of this discussion.

  • ||

    NutraSweet, you're drunk. Go home.

  • Fist of Etiquette||

    (He's thinking of Tuvix.)

  • Drake||

    I'll bet a bottle of firewater that you hate her "solution" to the problem.

  • ||

    I'm sure I do, even though I don't know what it is as I can't WTFV at work.

  • ||

    If I followed correctly: she wants to make banks pay the government for the implicit subsidy that makes them profitable, instead of just ending the subsidy. (is that right? Warren's argument seemed really off to me)

  • Drake||

    And I bet the corporate taxes they already owe are not part of that payment.

  • ||

    That's...retarded. Like, extra crispy fried retarded.

  • Brandon||

    She doesn't want a solution. She is just a demagogue.

  • Rasilio||

    So does she think that people who recently declared Bankruptcy should pay for the implicit subsidy the recieve by the governments guaranteeing their lenders they cannot go bankrupt again for 7 years?

  • ||

    Well it's.... closerto the right answer....

  • LTC(ret) John||

    She killed her way up to the seat on the committee, logically.

    /Bearded Spock

  • ||

    It'd be awesome if committee assignments and leadership positions on Capitol Hill really were obtained via assassination of weaker rivals.

  • NoVAHockey||

    Oh, whose's being naive now, ASM.

  • Brett L||

    Or at least duels. Preferably large bore shotguns with small barrels in close quarters.

  • Generic Stranger||

    She is very adept at counting coup.

  • Fist of Etiquette||

    That squaw is on the warpath. Bernanke will be lucky to keep his scalp.

  • John||

    The NYT is selling the Boston Globe. If the Kochs were the evil geniuses the Left things they are, they would buy the Globe and make sure every single headline related to Warren is an Indian joke.

  • Drake||

    That would make it the Boston Herald.

  • John||

    Not if it is written above a second grade reading level it won't be.

  • Drake||

    Then it wouldn't be the Globe either.

  • RPR2||

    they should certainly pay her for the gift she's given them in the CFPB.

  • EDG reppin' LBC||

    She's an Indian giver?

  • RPR2||

    and how.

  • albo||

    Oh, please, you're not praising Queen Leftie, are you? Blind squirrel, nut. That's it.

  • Generic Stranger||

    Of course Fakegawea's first instinct is to add another layer of regulations and bureaucracy, rather than just getting rid of the damn subsedy. Dialing back is not a concept that exists in the statist playbook.

  • ||

    You know, I'd be awfully pissed if Warren steals the mantle of being against crony centralized banking and bailouts despite the fact that libertarians have been against it for years before the crisis.

  • Drake||

    Or is it not crony and centralized enough?

  • John||

    I am not sure she can steal the mantle when she only objects to the cronyism because they are not her cronies.

  • SugarFree||

    She'll steal it just like we stole her people's land.

  • John||

    Down the ditches for a thousand years
    The water grew Lizzie's peoples' crops
    'Till the white man stole the water rights
    And the sparklin' water stopped

  • BakedPenguin||

    They took the whole Fauxcahautas Nation
    And put her on the committee for sequestration
    Took away her ways of life
    The tenure and the bow and knife

  • Virginian||

    Libertarians are the wrong sort, don't you know. Warren was at Hahhvaaaahd.

  • Paul.||

    So, Warren is hammering Bernanke on our policy of too big to fail and questioning the definition of 'profit' in the face of a kajillion dollars in subsidies... this makes it very difficult for me to not like Elizabeth Warren. And it's gonna make it very easy for Tony and Shrike to start not liking her.

    Cats chasing dogs...

  • Gladstone||

    I'm sure you can rest at ease once you hear what her "solution" is.

  • The Late P Brooks||

    I'll bet a bottle of firewater that you hate her "solution" to the problem.

  • Generic Stranger||

    ...is it the "final" solution?

  • LTC(ret) John||

    You know who else had...aw, nevermind.

  • Paul.||

    I will not take that bet.

  • John||

    The Cherokees always strictly limited the size of their banks.

  • Liberty Reloaded||

    An interesting libertarian perspective on gay marriage:

    http://takimag.com/article/let.....z2M81kVpiq

  • califernian||

    The libertarian stance on gay marriage should the same as for all marriage: no state involvement whatsoever.

  • Tony||

    What about for the interim between the real world and that utopian future?

  • califernian||

    Only if we include the polygamists.

  • OldMexican||

    Re: Tony,

    What about for the interim between the real world and that utopian future?


    In the meantime, you can crawl under the bed to cower in fear while us MEN change the world, missy.

  • Unindicted Co-conspirator||

    Also: fuck you, cut spending.

  • The Late P Brooks||

    Fuck.

    I'll bet a bottle of firewater that you hate her "solution" to the problem.

    I won't touch that bet with a ten foot lodge pole.

    Also, what are the chances Warren would sit idly by as Bernanke backed away from the bond market and let rates rise?
    Not good, thinks I.

  • Invisible Finger||

    This is how you can tell that A) Warren doesn't know what she's talking about, or B) that her ultimate goal is to seize retirement funds from non-government employees because people can't be trusted to have their retirement funds in accounts at banks that are or may become too big to fail.

  • John||

    Lizzie Warren, the bitchy mother in law you never wanted. Or is she the school principle who throws your kid out of school for pointing his finger at someone during recess?

    Can one women encompass so many negative stereotypes at one time?

  • SugarFree||

    She's the lesbian assistant principal that insists on chaperoning every school dance. The friend of your aunt's who told your mom about seeing you drunk at the water front. The Subaru Outlook covered in bumberstickers that slowly backs into her parking space in the morning.

  • ||

    And she absolutely does not allow any groping or making out.

  • John||

    Daylight between every couple at all times. And no one goes outside or to the bathroom for more than three minutes.

  • Heroic Mulatto||

    It will be a glorious day indeed when a terrified Elizabeth Warren is dragged out into the National Mall and hanged from the nearest lamppost.

  • albo||

    COEXIST

  • wareagle||

    so you're saying she's the most negative since negativity came to Negaville.

  • SugarFree||

    She's the worst. I know her type. She shuffles around the farmer's market in a surgical mask and farts when startled.

  • albo||

    She's a first wife who kept your dog.

  • Killazontherun||

    Ewwww. Your standards are not nearly high enough if you see her as either marrying or fucking material.

  • John||

  • From the Tundra||

    Jesus, why won't he just go away? Terrible then, worse now.

  • John||

    And to think he actually thought Kimmel would choose him as a guest over having the cast of a wildly popular cable show.

    At least in the musical world, heroin overdoses served a purpose.

  • From the Tundra||

    He's that delusional because people still fucking pay to see him. Every time he cancels a show for a sore vagina or something, it's news.

    He will never do us the favor of an overdose. He's more the cutter type. Must live to angst another day

  • RPR2||

    can't wait for the new season of Duck Dynasty tonight and King Ranch Squirrel for dinner.

  • Killazontherun||

    Cancel out on Fallon, he always has a better band to fall back on who are already being paid to perform.

  • Brett L||

    I'll only say again that the Youtube video of Morrisey and Uncle Sy talking past each other in hilarious incoherency would have been a solid gold internet sensation.

  • ||

    Low testosterone causes aggression, and eating meat increases testosterone. Connect the dots. THE TRUTH IS OUT THERE.

  • Drake||

    I thought high testosterone causes aggression? WTF? You are pissing me off.

  • R C Dean||

    Warren asked Bernanke why banks shouldn’t pay for this implicit subsidy, to which the Federal Reserve chairman responded “I think we should get rid of it.”

    So what's stopping him? Doesn't the Chairman get what the Chairman wants?

    Or is he, perhaps, concerned that raising the rate charged at the discount window will set off a spiral of rising interest rates, crushing the federal budget under massive debt service and wiping out the balance sheets of banks, insurers, pension funds, etc. as the value of their low-interest bond portfolios gets obliterated?

  • CatoTheElder||

    Maybe he's even worried about the value of the Fed's own massive, low-interest bond portfolio.

  • ||

    If you want to get smart on this subsidy issue, see this Dealbreaker piece shutting down Bloomberg's calculation (warning, it involves basic math)- http://dealbreaker.com/2013/02.....er-number/

    Although their are plenty of reasons to hate on Bernanke, it's unwise to do so by promoting Warren.

  • BakedPenguin||

    Looking at interest expense as a percentage of total liabilities is a bad way to begin. The TBTF banks might have a higher percentage of interest expense simply because they are over-leveraged. Which they could be because they know they're... wait for it... too big to fail.

  • califernian||

    Federal Reserve chairman responded “I think we should get rid of it.”

    He is lying. He does not think that.

  • Drake||

    Lying or accidentally letting the telling the truth?

  • Tony||

    John you're an obnoxious pig.

  • ||

    C'mon, now you're not even trying.

  • Invisible Finger||

    Seems like Liz went off the reservation in that video.

  • ant1sthenes||

    They should scale up reserve requirements with market share, but I doubt that would be discussed.

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