News release: “After the collapse of Lehman Brothers in 2008, Congress passed TARP, the Troubled Asset Relief Program, to prevent another “catastrophic” bank failure. Nearly a year later, the government has essentially formalized the idea that major banks are “too big to fail” (TBTF). A new report from the Center for Economic and Policy Research (CEPR) produces some preliminary calculations to quantify the value of this government support and the implicit subsidy that TBTF policy represents. The paper, The Value of the ‘Too Big to Fail’ Big Bank Subsidy, uses data from the Federal Deposit Insurance Corporation (FDIC) to show that the interest rates paid by TBTF banks were significantly lower over the last year than the interest rates paid by smaller banks. This gap has grown considerably since the period before the Lehman collapse. In other words, the TBTF banks can borrow money at much lower rates than small banks whose cost of funds is determined based on their credit worthiness.”