Our financial overlords are teh awesome

How short is your memory? BoA, forced to purchase the fetid piece of sub-prime mortgaged Merrill Lynch, is bringing back that icon of the bull market.

NEW YORK (Reuters) – Bank of America Corp (BAC.N) will spend as much as $20 million in the fourth quarter of 2009 to relaunch Merrill Lynch's name and long-time bull logo.

The former Merrill Lynch and & Co's operations will now be known as Merrill Lynch Wealth Management, and be one of two primary units in Bank of America's Global Wealth and Investment Management division, Sallie Krawcheck, the division's president, told a press conference.

She called the Merrill Lynch operations and the U.S. Trust business, the other main unit, two of the industry's "crown jewels," adding that she feels the industry is beginning to rebound.

"It feels like momentum is turning," she said.

Or it's the worm that's doing that, she's not sure which. And no word on how much tax payer money is funding this buy, either directly or indirectly less directly.

During the credit bust, our leaders embraced the too-big-to-fail policy, reluctantly bailing out large institutions to save the system from collapse, they said. Yet even as the crisis has abated, these policy makers have shown little interest in cutting financial monsters down to size. This is especially disturbing given that some institutions have grown even larger as a result of the mess.

It is perverse, of course, to reward big banks’ mistakes with bailouts financed by beleaguered taxpayers. But the too-big-to-fail doctrine benefits the banks in other ways as well: the implication that an institution will not be allowed to fall gives it significant cost advantages over smaller, perhaps more responsible competitors.

Quantifying these advantages is difficult, though. While bailouts have numbers attached to them, hidden benefits, again subsidized by the taxpayer, are harder to assess. The result is that taxpayers may mistakenly believe that when a bailout recipient repays a loan, subsidies received by the institution have stopped.

Because our government wouldn’t dream of calculating the hidden costs associated with the bailout binge — taxpayers might become even angrier than they already are — it is gratifying that the Center for Economic and Policy Research, a liberal research group in Washington, has taken a stab at the task.

Dean Baker, an economist and co-director of the center, and Travis McArthur, a research intern, analyzed banks’ costs of money to compare the interest rate that smaller banks pay to attract deposits and borrow funds with the rate paid by behemoths perceived as too big to fail.

Using data from the Federal Deposit Insurance Corporation, Mr. Baker’s study found that the spread between the average cost at smaller banks and at larger institutions widened significantly after March 2008, when the United States government brokered the Bear Stearns rescue.

From the beginning of 2000 through the fourth quarter of 2007, the cost of funds for small institutions averaged 0.29 percentage point more than that of banks with $100 billion or more in assets. But from late 2008 through June 2009, when bailouts for large institutions became expected, this spread widened to an average of 0.78 percentage point.

At that level, Mr. Baker calculated, the total taxpayer subsidy for the 18 large bank holding companies was $34.1 billion a year.

I for one am just glad to help out.