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Mark Whitehouse

Big Banks Can't Hide Their Taxpayer Subsidy

The debate over what to do about the largest U.S. banks is reaching a new peak as government auditors and regulators prepare to address two issues.

The debate over what to do about the largest U.S. banks is reaching a new peak as government auditors and regulators prepare to address two issues: Whether some banks enjoy special advantages because they are deemed too big to fail, and whether tougher capital requirements are needed to make failures less likely.

One of the big banks' aims is to debunk the idea that they enjoy a taxpayer subsidy -- in the form of lower borrowing costs -- because creditors assume the government will always bail them out. In February, Bloomberg View, using a 2012 paperby economists Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz, estimatedthe annual taxpayer subsidy to be $83 billion for the 10 largest U.S. banks.