The bank bailouts of 2008 set a benchmark for how far the US and European governments will go to protect large financial institutions. It essentially said to these banks, shame on you for your shady investment practices, but you’re too important to the economy to pay the true cost of your bad decisions. And now that government protection of financial institutions has been established, these banks can reap the reward of an effective ‘government guarantee’ on their investments. According to an article from the New York Times Economix Blog citing a recent study by the I.M.F., this effective ‘government guarantee’ is actually allowing large financial institutions to borrow at a rate 1% (100 basis points) cheaper than they would be able to otherwise. The study estimates the total benefit from this implicit protection to US financial institutions to be $70 Billion per year, while institutions across the EU benefit to the tune of $300 Billion a year from the protection they receive from the EU. And these estimates might actually be low because the study did not take into account the effect that this implicit government backing has on the credit ratings of these banks. As Congress is contemplating increasing regulations, including capital requirements, on banks, these numbers should be a sobering reminder of who is really benefitting from current financial industry policy. And given the generous protection the US government has afforded these banks, the least we could do is implement common sense regulations to make sure that what happened in 2008 doesn’t happen again.