A very nice characterisation of how Euro-area taxpayers subsidise private banks. It is worthwhile noting that the RBA has exactly the same REPO facilities, which I have discussed for years here:
"This happens, for instance, when the ECB/Eurosystem subsidises its counterparty banks through the terms of its repo operations or through its actions in the secondary markets for sovereign debt or for private debt. So far only just over €60 billion of covered bonds have been purchased by the ECB/Eurosystem, as well as €60bn of sovereign debt, but under the Securities Market Programme (SMP), the ECB/Eurosystem can not only purchase sovereign debt outright, it could also purchase any private securities it sees fit, including, in principle, bank debt, bank subordinated debt or bank equity. To the extent that these transactions contain an element of subsidy, the ECB will pay less dividends to its shareholders (the NCBs of the 16 Euro Area member states are the dividend receiving shareholders of the ECB). These 16 NCBs will pay less ‘dividends’ to their beneficial owners, in practice, the Treasuries of the 16 Euro Area member states.
The ECB/Eurosystem can therefore act in a quasi-fiscal capacity, achieving through financial market transactions redistributions between on the one hand the owners of banks and/or unsecured creditors of banks, and on the other hand tax payers or beneficiaries of public spending."
