Quelle Suprise! Banking Profits Might Be Due to Big Government Subisdies!

Actually, despite the somewhat churlish headline, the story “Bailout Helps Fuel a New Era of Wall Street Wealth,” by Graham Bowley at the New York Times, is a solid job of reporting and does not tiptoe around the issue of the big bennies that the financial services industry is enjoying and their role in creating outsized profits. It also makes a distinction, which has escaped many writers, that the firms that are doing really well are the big capital markets players, not conventional banks (or firms like Citi and Bank of America, that are capital markets firms with very substantial commercial banking operations). It was the markets that the powers that be were panicked to save (debt is now heavily intermediated on over-the-counter credit markets, vastly less on bank balance sheets than it once was). And with the subsidies directed mainly at shoring up credit markets and the firms that own and operate the crucial trading infrastructure, it should be not wonder that the players that were most deeply involved are showing the greatest gains.

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