The GAO has released the first of two reports it plans to address requests from the Senate to assess the extent to which large BHCs enjoy subsidies or other support from the federal government that increase moral hazard. This paper assesses the actual amount of support large BHCs received during the crisis and does not discuss the perceived TBTF status these BHCs may also enjoy that creates expectations of government intervention and, thus, subsidies for BHCs with assets over $500 billion. The second report will take this on, including through a specific assessment of the value of perceived and real taxpayer support. However, the current study’s conclusions suggest that the next GAO report will find a considerable subsidy because of the specific benefits found to have been provided to the largest BHCs in key parts of the analysis. The GAO is generally satisfied with FDIC work to build out the orderly-liquidation authority (OLA), although it notes considerable concern about the agency’s ability to handle a systemic crisis and/or to ensure cross-border cooperation. It is still less sanguine over the Federal Reserve’s actions to end emergency support that could benefit one or another large bank, pressing the FRB to issue the rules required by Dodd-Frank.

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