The government safety net provides the motivation to take greater risks than they otherwise would in search of ever-greater profits, Mr. Barofsky added.
Credit-rating firms are giving these too-big-to-fail institutions higher ratings based on the government’s implied guarantee, Mr. Barofsky said. As a result, he said, lenders can give these institutions loans “at a price that does not fully account for the risks created by their behavior.”
That effective government subsidy, he said, enables big profits and allows the largest institutions to grow larger while putting small banks at a disadvantage.
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TARP Watchdog: Big Banks Got Unfair Advantage - WSJ.com Sawickipedia: To those wondering what corporatism is - this pretty much says it. Big Corporations rigging the political and regulatory system to their advantage over smaller competitors. |
