Bloomberg View: The Wrong Business for Big Banks
It’s time to end subsidies that foster speculative activity in commodities
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The largest U.S. banks are accused of causing problems in markets ranging from energy to aluminum. Regardless of whether they’re guilty of market-rigging, as critics say, the charges raise another question: Why are the banks in these businesses in the first place?
Part of the answer is that they’re among the country’s most subsidized enterprises. The Federal Deposit Insurance Corp. and the Federal Reserve, both backed by taxpayers, provide an explicit subsidy by ensuring that banks can borrow money in times of market turmoil. Banks that are big and connected enough to bring down the economy enjoy an added implicit subsidy: Creditors will lend to them at low rates on the assumption that the government won’t let them fail.