Mega Bank JP Morgan Chase Receives A $14 Billion Annual Subsidy From The U.S. Government

By Pat Garofalo

June 2012--JP Morgan Chase CEO Jamie Dimon testified on Capitol Hill today for the second time in two weeks, appearing before the House Financial Services Committee to discuss the trading debacle that has cost his bank billions of dollars.

Give that guy a promotion!

Before the hearing, Bloomberg News pointed to a new study showing that JP Morgan Chase receives a $14 billion annual subsidy from the U.S. government.

I had a neighbor whose entire existence was shopping! She’d get up (around 12:00 noon), have her coffee, check the newspapers for specials, dress, and hit the malls around 2 pm and shop until she literally dropped! She was the epitome of a professional shopper!

This subsidy is due to JP Morgan’s reputation as a too-big-to-fail bank, which lets it borrow money at lower rates than other, less systemically risky banks:

Oh, did I mention Barb was a mega-person? 

JPMorgan receives a government subsidy worth about $14 billion a year, according to research published by the International Monetary Fund and our own analysis of bank balance sheets.

Yeah...that’s what I need, a subsidy so I can give me a big salary and bonuses...and go shopping with Barb!

In a recent paper, two economists—Kenichi Ueda of the IMF and Beatrice Weder Di Mauro of the University of Mainz—estimated that as of 2009 the expectation of government support was shaving about a 0.8 percentage point off large banks’ borrowing costs.

Oh, bless their little black hearts!

That’s up from 0.6 percentage points in 2007, before the financial crisis prompted a global round of bank bailouts.

Oh dear! That sounds costly to the people.

To estimate the dollar value of the subsidy in the U.S., we multiplied it by the debt and deposits of 18 of the country’s largest banks, including JPMorgan, Bank of America Corp. and Citigroup Inc.

The result: about $76 billion a year. The number is roughly equivalent to the banks’ total profits over the past 12 months, or more than the federal government spends every year on education.

I bet that number has a lot of zeroes...

JPMorgan’s share of the subsidy is $14 billion a year, or about 77 percent of its net income for the past four quarters.

In other words, U.S. taxpayers helped foot the bill for the multibillion-dollar trading loss that is the focus of today’s hearing.

Got your checkbooks out, folks...

At the last hearing, the Senate all but groveled at Dimon’s feet, and today’s questioning was not much better. But Rep. Brad Sherman, D-CA, did ask Dimon about the Bloomberg study.

He did? The nosy bastard!

Dimon denied that his bank receives a funding advantage due to its size, saying that the bank is “probably pretty much like everybody else.”

Not only did Dimon deny the allegation, he defied the alligator!