Audit Notes: Unfair Size Advantage, Bumped Down, WSJ Win

Reuters Breakingviews finds another unfair advantage for the too-big-to-fail banks: They’re paying less interest for deposits than their smaller competitors—a lot less:

The interest rates paid on those deposits vary widely. In the fourth quarter of 2009, institutions with more than $100 billion of assets paid an average of 0.77 percent annual interest on deposits, according to F.D.I.C. data. By comparison, institutions with less than $10 billion of assets paid an average of 1.73 percent. That difference — nearly 1 percentage point — is one measure of the benefit that big banks enjoy from implicit government backing. They can pay less for deposits to customers happy with this assurance.

And it adds up to quite a bit. The 10 largest banks hold about $3.2 trillion of America’s $7.7 trillion of domestic deposits. Apply the differential in deposit interest rates, and those 10 appear be saving nearly $30 billion a year thanks to their size.

Like Daniel Indiviglio, I’m not so sure the government TBTF guarantee is what’s going on here, though. The FDIC insures small banks just like it does big banks—up to $250,000 per account. I suspect what’s happening is indeed a function of their size: The big banks have merged and bought up banks and now the top four control 64 percent of deposits. It’s inertia. It’s a real time-consuming pain in the neck to change banks. The big banks have captured consumers through acquisition and have figured out they don’t have to pay as much for them. I’d guess that’s as much a part of the disparity as ATM and branch locations.

But that’s a guess. This sure calls for further inquiry.

The New York Times has a nice page-one story today on workers settling into jobs they’re overqualified for. But I think it illustrates how we journalists tend to write for people of our station:

Conventional wisdom warns against hiring overqualified candidates like Mr. Carroll, who often find themselves chafing at their new roles. (The posting for his job had specified “bachelor’s degree preferred but not required.”) But four months into his employment, it seems to be working out well for all involved…

But Mr. Carroll is just one of several recent hires at Cartwright who would be considered overqualified, including a billing clerk who is a certified public accountant and a human resources director who once oversaw that domain for 5,000 employees but is now dealing with just 65.

Let’s not forget that for every highly educated person who slides down the totem pole a bit, another person gets bumped lower. And so as of September, college graduates were essentially at full employment—4.5 percent—while high-school graduates were jobless at twice that rate, or 9.1 percent. Don’t have a high-school degree? Try 17.5 percent.

The Wall Street Journal’s page-one effort on a billion-dollar tax break for JPMorgan Chase may have gotten some results, it writes today:

The Federal Deposit Insurance Corp. backed away from its support for a $1.4 billion tax break benefiting J.P. Morgan Chase & Co., setting up a battle between the regulator and the nation’s second-largest bank…

The FDIC became concerned about the potential refund and other issues last week following a story in The Wall Street Journal and a meeting with Washington Mutual bondholders who oppose the deal, said people close to the talks. The 2009 stimulus bill excludes any companies that received bank-bailout funds from getting the tax refunds; New York-based J.P. Morgan received $25 billion in 2008.

Nice work, WSJ. You may have just saved taxpayers $1.4 billion!

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.