In Ironic Twist, U.S. Taxpayers Are Approaching Net Debt-Free Status

BofA estimates that the U.S. Treasury and Federal Reserve combined, now are responsible for directly supporting about 70% of the banking system liabilities and 20% of shareholders' equity. Presuming there is virtually no equity value in U.S. banking, which would of course be the case without systemic support, then liabilities equal assets. In that case, in a government mediated vicious circle, U.S. taxpayers have indirectly paid off 70% of the loans that the US banking system has underwritten to U.S. taxpayers...

We say one resolution to this whole problem is balance the two sides of the equation: write off the taxpayer loans that the government supports, remove the systemic crutches, inject any new rescue funding at the preferred level, and voila - here is your bank rescue.

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