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JPMorgan's $10 Billion Subsidy

The value of being too big to fail
JPMorgan's $10 Billion Subsidy
Photograph by Andrew Harrer/Bloomberg

In  late June, Jamie Dimon told a Senate committee that no taxpayer money was “impacted” by this spring’s trading losses at JPMorgan Chase. Dimon, the bank’s CEO, meant that no one at the Treasury Department had to write a check to save the bank. He’s right, and likely to continue to be right, even after the revelation that the bank’s trading losses might run as high as $9 billion. But checks are not the only thing of value the federal government can offer a bank.

According to Reuters, on June 28 Richard Fisher, president of the Dallas Federal Reserve, said that the markets assume that larger banks are too big to let fail. That much we knew. He also pointed out that this assumption lowers borrowing costs for those banks, which he called an “unfair subsidy.” He didn’t name names, but we can. Even better, we can give you an idea of the size of this subsidy. By one estimate, between 2007 and 2010, simply being too big to fail saved America’s biggest banks a combined $120 billion. Citigroup saved the most, coming in at just over $50 billion. And even with its fortress balance sheet, JPMorgan saved just under $10 billion thanks to its size and importance.