It’s happened again. A major European bank has to be bailed out with taxpayer money.
The Banco Espírito Santo of Portugal is being kept artificially alive thanks to about €5 billion ($6.7 billion) in state funds. Although stockholders and bondholders also have to contribute, the lion’s share of the cash is once again being taken from taxpayers. The financial lifeline is coming from an aid package that Portugal received during the financial crisis from the European Union, International Monetary Fund and European Central Bank.
Almost six years after U.S. investment bank Lehman Brothers went bust, not much seems to have changed in governments’ vulnerability to extortion by major banks. The problem of being “too big to fail” — that certain banks cannot be allowed to fail because such a collapse poses a systemic risk — remains unsolved.