General Discussion
In reply to the discussion: Study: Mega bank JP Morgan Chase receives a $14 billion annual subsidy from the US government [View all]econoclast
(543 posts)noun pl. sub·si·dies.
1. a direct pecuniary aid furnished by a government to a private industrial undertaking
In this case there is NO direct pecuniary aid. For those who know what that means ... The government isn't paying JPM 16 billion a year. No money is changing hands here.
Because OTHER PRIVATE COUNTERPARTIES BELIEVE that in the event of a meltdown the government would bail out JPM, these OTHER PRIVATE COUNTERPARTIES are willing to lend to JPM for less than they otherwise would.
The calculated difference between what they otherwise might charge JMP is the 16 billion a year.
Moreover Dodd Frank purports to end TBTF via the new special regulator and new resolution authority. So there is legislation that explicitly addresses the TBTF assumption made by counterparties. So there should not be an "implicit" guarantee assumed any more.
Unless you want to argue that Dodd Frank isn't in reality what it was marketed to be.