Mega banks not only take your financial deposits and subsequently create absurd amounts of non-existent fiat currency to spend intro oblivion, but they are actually being explicitly funded by United States taxpayers to the tune of $83 billion per year.
In reality, banks are very fragile. A single bank holiday could collapse the entire industry, and we have seen the government step in between the free market and the mega banking conglomerate more than a couple times to inject multi-national banks with a financial surplus. It is this fragile nature that can also be found in the actual profitability of the banks. As it turns out, United States taxpayers are generating a shocking amount of income for bank shareholders through inflating the credit ratings of mega banks.
In a report by Bloomberg, it is revealed that since the mega bankers are generally seen as ‘too big to fail’ (after all, if they begin to decline the government will surely save them), their credit worth is inflated to a large degree. With the hand of the government propping up the backs of these banking institutions, it allows them to borrow for much lower than what reality would dictate. As International Monetary Fund (IMF) data explains, the taxpayers end up paying for the borrowing costs of these banks through implied government assistance.
Based on the data, the top 10 largest banks receive 0.8% of their assets through this mechanism. It doesn’t seem like much percentage wise, but when you bring in $9 trillion worth of assets, it becomes expensive.
$83 Billion Taxpayer Dime ‘Transferring to Bank Shareholders’
Just the top five banks alone account for $64 billion in government-directed borrowing deductions that serves to pay off bank shareholders. Bloomberg even states that the system, which turn into profits for the banks, are “…essentially transfers from taxpayers to their shareholders.”
A statement that is not surprising, given the fact that in 2006, CEOs and executives made an average of $1,723 for every single dollar made by the US workforce. Does that mean all CEOs and executives are bad people? No, but it means there has been a real financial paradigm shift since decades ago where the average CEO made only $40 for every dollar generated by the average employee. And when it comes to indirectly funding these individuals with $83 billion verses workers who are making dirt by comparison, then there is a problem.
This is especially true when considering that if the banks were not receiving this reduced borrowing assistance, they actually would be in a much more dire state of finances. When we look at the top five banks:
- Bank of America
- Wells Fargo
- Goldman Sachs
We find that the income from taxpayer-assisted credit upgrades is actually comparable to their overall annual profits. What does this mean? It means that without government backing injected into these mega banks by the United States government, they’d actually have to change their dreadful business practices. Perhaps they’d even have to focus on customer service or transparency. This is something that they simply cannot have.
Bank of America, for example, has been caught up in a large degree of fraud, with even the Justice Department seeking $1 billion for their defective mortgages. Yet we still shovel$83 billion a year to funding these banks through government ‘guardian angels’ despite the banks doing nothing to repay the debt.
Can you imagine what would happen if taxpayers awoke to this fact, demanded change, and left the banks to fix their own problems? Free money would no longer support their scams, frauds, and generally awful practices.