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Cost Of Being TBTF (Too Big To Fail): Now Just $28Million

Wednesday, April 17, 2013 - 10:24 AM
From Forbes:
When Dodd-Frank, the banking reform law passed in the wake of the financial crisis, was originally envisioned, co-author Congressman Barney Frank, members of the Obama administration, and others believed the new rules would encourage banks to shrink by making it too expensive to remain big. That, they believed, was the best way to solve our financial system's Too Big to Fail problems.

On Monday, the Fed finally announced its plans to implement a tax on the nation's largest banks and other financial firms that are deemed "systemically important." What's the cost of being Too Big to Fail? A mere $28 million.

That's roughly how much Citigroup (C), the smallest of the nation's four largest banks, would have to pay each year under the Fed's proposed rules. To put that in perspective, Citigroup also announced its first-quarter earnings on Monday. The bank netted $4 billion. The Fed's new fee is just 0.7% of those earnings, and that's just what the bank earned in the first three months of the year.

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