Bankers get a little help from their pals in government and it falls on the taxpayer.

HERE is a tale of two leg-ups: a tale to raise the hackles of the so-called 99 per cent and a tale that plays to the contrast between the US and Australia when it comes to corporate welfare. Late last week, amid the parliamentary din surrounding the carbon tax, a quiet little bill slipped through the Senate with minimal fuss.

This was the ”covered bond” legislation – another friendly leg-up to the banks and one that effectively lumps another $130 billion of risk into the lap of taxpayers.

But first, late on Tuesday night this story flashed up on Bloomberg: ”Bank of America Corp (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

”The Federal Reserve and Federal Deposit Insurance Corp disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorised to speak publicly.”

Translating from ”Bloomglish” to English: a cabal of powerful ”counterparties” (read banks) had, with the connivance of the Fed, shifted a load of derivatives (probably the gnarliest credit default swaps on their books) from that part of the bank not backed by taxpayers to that part of the bank that was backed by taxpayers.

While the Occupy Wall Streeters mill about outside their windows, the doyens of Wall Street have orchestrated another leg-up from taxpayers, hand-in-glove with their pals on the privately owned US Federal Reserve.

To round out the picture here, the FDIC is the agency that objected to this. It is also the agency that would have to pay out Bank of America’s depositors should BAC hit the wall, most likely with a top-up in funding from Washington.

The bank got a $US45 billion bailout in the financial crisis, after it had swooped to mop up ailing merchant bank Merrill Lynch. It’s a fair bet that, of its notional $US75 trillion in derivatives, Merrills’ riskiest bets have just been transferred from the BAC holding company to the bank. Is there another TARP in the works?

Meanwhile on these fair shores, the banks now enjoy the fillip from ”covered bonds”.

Covered bonds will allow the banks to raise capital a bit more cheaply. They are issued to big institutional investors but, unlike other corporate bonds, rank ahead of depositors’ rights in the event of trouble. They are safer, therefore carry a lower yield.

The banks have already been propped by guarantees on their wholesale funding and deposits, not to mention the short-selling ban and special asset swap arrangements with the Reserve Bank.

Now, with covered bonds – which had previously not been allowed as they provide senior secured funding for bondholders at the expense of depositors – the taxpayer is on the hook for the banks’ deposit liabilities.

Mind you, in a de facto sense if not de jure, the taxpayer is on the hook anyway as the financial crisis demonstrated banks are a cherished species too big to fail. Observers estimate their cost of funds should be 30 basis points lower, thanks to covered bonds, although few really expect this little earner to be passed on to customers.

In any case, covered bonds shift risk away from wholesale bond investors to taxpayers – and we are talking about $130 billion worth of risk, possibly increasing with time.

There is no quid pro quo. At least with the sovereign guarantee for wholesale funding the banks had to pay a fee. This is best described as a backdoor sovereign guarantee.

Shareholders can take comfort from the fact that their government lobbyists, as usual, have been working overtime to have their way with Canberra.

Their case relied on the argument that 1) cheaper funding could be passed through to borrowers (we’ll believe that when we see it) and 2) the foreign banks are allowed to do it.

And they surely are, but the foreign banks don’t really compete head-to-head with the locals in their $A lending markets.

As far as leg-ups go, you would have to say America is in another league to Australia when it comes to bailouts, banksters’ rorts and general economic turmoil.