This is a losing bet. The article says it's losing 10 mm/month. Do you think that taxpayers will be covering that loss? Because they won't, because WFC is making more than 10mm/m and is in no danger of going bankrupt.
Yes, because money is fungible, and Wells-Fargo (& its "systemically-important" peers) receives via its privileged positions a de facto non-stop rolling bailout in addition to any occasional "crisis" larger headlingebailouts.
This fumble – at "just" $120mm losses per year – is still pretty small compared to its billions in income. A drop in the bucket!
But the reason they can take, and survive, any number of such unwise swings at no material risk to their insiders & shareholders is that their overall income is largely a function of their oligopolistic power & bottomless access to cheap federal money. They just have to avoid drawing on it "too much", in a "too unseemly" manner.
They can push that advantage a little more when they lose more elsewhere, as long as their coarse risk and overall results look similar to their peers – who are similarly pressing their special advantages around the edges.
So there won't be a specific measly transfer from public funds, "this is covering your failed Bilt program", of course. But they can just lean on their advantages a little more, and "keep up with the Joneses" in their peer banks in coarse indicators, with everyone at the trough (executives, politicians, politicians' pet projects, major shareholders) not facing any even marginal negative feedback.
And in some next major macro reversal which puts all banks of the same class in danger, it'll all be papered over again – bringing them up to some level of stability without regard to how many extra hundreds of millions leaked through Bilt-style errors or sweetheart deals to favored groups. So de facto, retrospectively, all those leaks were "free" to the insiders.
If you believe all that then it sounds like you should invest 100% of your assets in systemically important bank stocks. If they have literally zero risk due to unending bailouts then your risk-adjusted returns will be amazing.
That'd be a good plan, if you could count on the loot flowing fairly & proportionately to any commoner who buys shares on the public markets. But in a rentier racket this big, that doesn't happen.
Large amounts go to management insiders, or are kicked-back to politicians & their allies or pet causes via donations or sweetheart deals to favored projects – which might show up as "losses" on "failed projects" eventually, but hey, it can all be covered out of the privileged rolling take from everyone on the outside.
This fumble – at "just" $120mm losses per year – is still pretty small compared to its billions in income. A drop in the bucket!
But the reason they can take, and survive, any number of such unwise swings at no material risk to their insiders & shareholders is that their overall income is largely a function of their oligopolistic power & bottomless access to cheap federal money. They just have to avoid drawing on it "too much", in a "too unseemly" manner.
They can push that advantage a little more when they lose more elsewhere, as long as their coarse risk and overall results look similar to their peers – who are similarly pressing their special advantages around the edges.
So there won't be a specific measly transfer from public funds, "this is covering your failed Bilt program", of course. But they can just lean on their advantages a little more, and "keep up with the Joneses" in their peer banks in coarse indicators, with everyone at the trough (executives, politicians, politicians' pet projects, major shareholders) not facing any even marginal negative feedback.
And in some next major macro reversal which puts all banks of the same class in danger, it'll all be papered over again – bringing them up to some level of stability without regard to how many extra hundreds of millions leaked through Bilt-style errors or sweetheart deals to favored groups. So de facto, retrospectively, all those leaks were "free" to the insiders.