Debt Sold by Bank Of America and Citigroup Would Be JUNK Without Government Guarantees

Government Chooses Big Banks Over the Little Guy … Year After Year

Bloomberg reports:

Rescued From Junk

***

In a March 27 report, Moody’s displays a bar chart of its credit ratings for the banks in blue. In green bars, it shows Goldman Sachs and Wells Fargo would be rated two grades lower if the taxpayer backstop didn’t exist. Moody’s boosted Morgan Stanley’s score by two grades for the same reason, even though it had downgraded that bank in June 2012.

The scores for Bank of America, Citigroup and JPMorgan (JPM) are three grades lower in the green bars.

Debt sold by the holding companies of Bank of America and Citigroup (C), the second- and third-biggest U.S. banks by assets, would fall to junk status without the implicit government guarantee, Moody’s Senior Vice President David Fanger says.

Bloomberg is probably being too generous to the big banks, stating:

All told, the financial advantages for the six biggest banks since the start of 2009 amounted to at least $102 billion, according to data compiled by Bloomberg.

But top banking analyst Chris Whalen estimates that the big banks receive a subsidy of $780 billion dollars every year.

And everyone knows that virtually all of the giant banks’ profits come from various government subsidies.

Indeed, the big banks have repeatedly gone bust due to stupid and risky bets … but the government keeps choosing the big banks over the little guy.

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  • Washington76

    PBOC faces balancing act with rate, inflation 2013-05-14 By WANG XIAOTIAN (China Daily)

    http://usa.chinadaily.com.cn/business/2013-05/14/content_16496354.htm

  • Dodd-Frank is harming the banking system, especially community banks

    http://images.politico.com/global/2013/05/06/2013-05_marsh-norman.html

    “Although policymakers enacted Dodd-Frank to avoid too-big-to-fail situations, in reality, its effect is the opposite. The act will force greater asset consolidation in fewer megabanks by increasing the competitive advantage large banks have over smaller banks.

    Dodd-Frank will make it harder for community bank customers to obtain loans because it encourages financial product standardization, which undermines the relationship banking model and decreases the diversity of consumer banking options. As a result, credit and banking services will be eliminated or become more expensive for small businesses, those living in rural communities, and millions of informationally opaque American consumers and businesses that are challenging or less profitable for large banks to serve.”

  • JosephaIorio

    HR 129 The Return to the Prudent Banking Act AKA Glass Steagall

  • Tonto

    All the big bank bonds are junk anyway. Not one of the banks listed is solvent under any accounting rules that realistically access the assets behind the liabilities they have. The big banks are all so far underwater, the sunlight has been completely blocked out.

    The FED has been busy closing smaller banks, even while the condition of the large banks is so bad, they have been called -too big to FAIL- for a half decade. Of course they all have failed.

    And while the FED can prop these failed institutions up for a while, it’s just simply not going to work out in the long run. These banks are sunk. And they will not be raised from this deflationary depression in any meaningful way.

  • How to Let Too-Big-To-Fail Banks Fail http://www.hoover.org/news/daily-report/147216