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Tuesday September 16th 2014

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The Value of the “Too Big to Fail” Big Bank Subsidy

One outcome of the TARP and other bank rescue efforts following the  collapse of Lehman Brothers in September of 2008 is that the United States has essentially formalized a commitment to a “too big to fail” (TBTF) policy for major banks. This paper uses data from the Federal Deposit Insurance Corporation (FDIC) on the relative cost of funds for TBTF banks and other banks, before and after the crisis, to quantify the value of the government protection provided by the TBTF policy.
BY DEAN BAKER AND TRAVIS MCARTHUR*

http://www.cepr.net/documents/publications/too-big-to-fail-2009-09.pdf

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