Morning Must-Read: Simon johnson: The Too Big To Fail Subsidy Debate Is Over

Simon Johnson: The Too Big To Fail Subsidy Debate Is Over: “No doubt there is still a lot of shouting to come…

…but this week a team at the International Monetary Fund completely nailed the issue of whether large global banks receive an implicit subsidy courtesy of the American government…. Yes, there is an implicit subsidy that lowers the funding costs for very large banks… as much as 100 basis points… and yet this large scale of implicit support is small relative to the macroeconomic damage that is likely to be caused by the high leverage and incautious risk-taking that the subsidy encourages…. Still, as I explain in my NYT.com Economix column, I’m a big fan of this work because the Fund’s report is very good on how to handle and reconcile the main alternative methodologies for getting at the issue. The Fund offers an entirely reasonable approach that sets a very high quality bar.”