Source: Doug Owen
In an ironic and awkward moment for unabashed Federal Reserve apologists and rivals alike, Fed academics have come out with a new "landmark" study, which comes to some very obvious conclusions. The Fed has figured out after much thought, that the mega-banks they have continually engendered, have actually become "To Big To Fail."
Face-palms all around.
A landmark study by Federal Reserve economists found that large U.S. banks enjoy a "too-big-to-fail" advantage in financial markets, confirming the suspicions of many Wall Street critics more than five years after the financial crisis.
The series of research papers, published on Tuesday by the U.S. central bank's influential New York branch, suggests the biggest and most complex banks benefited even after the financial crisis from lower funding and operating costs compared to smaller firms. The researchers used data through 2009.
The biggest banks also, Fed economists found, can take bigger risks than their smaller peers.
While the study did not pinpoint the reason big banks borrow more cheaply, Wall Street critics say it is because investors believe the U.S. government would again rescue them in a panic, despite new rules adopted in the wake of the 2007-2009 crisis and aimed at avoiding future bailouts.