Simon you wrote, "But both left and right agree on the fundamental asymmetry that the recent “Citigroup Amendment” implies: Bankers get rich whether they win or lose, because the US taxpayer foots the bill when their risky bets fail."



Federal Taxes pay for nothing. The reason is the underlying reality of what a U.S. Dollar actually is: It is simply a promise, by the U.S. sovereign government, that it will accept the Dollar as payment for a Dollar’s worth of taxes. That’s it. A Dollar—whether it’s a paper Dollar or an “electronic” Dollar—is nothing more than that promise. The sovereign government doesn’t promise to exchange a Dollar for gold or silver, or for anything else of intrinsic value. It promises only to accept the Dollar in exchange for the cancellation of a Dollar’s worth of taxes due. In other words, a Dollar is the I.O.U. of the sovereign government. The Dollar says: “I owe you one Dollar’s worth of tax credit.”



This I.O.U. means a lot more to all of us in the Private Sector (households and businesses) because we also use this I.O.U. Dollar for our MONEY—we use it to buy goods and services from each other, to invest in business ventures, and to save for future spending in our retirement. But at its most official heart, the U.S. Dollar is simply the I.O.U. promise of our sovereign Federal Government.



The Dollar is “destroyed” when it is used to pay U.S. Taxes. You give the Federal Government back its I.O.U., the FG declares your taxes paid, and the I.O.U. is cancelled. That I.O.U. is of no further use to the Federal Government. It is illogical for the FG to “keep” an I.O.U. that says it owes something to itself. It could recycle the I.O.U. and use it to buy new goods and services from the Private Sector. But even that is illogical, because it is far easier and more efficient, when the Sovereign Government needs to spend again, for it to simply issue a new I.O.U. This is especially true since the vast majority of Dollars issued and spent are electronic—simple keystrokes on a computer screen.



http://neweconomicperspectives.org/2014/01/diagrams-dollars-modern-money-illustrated-part-1.html



http://neweconomicperspectives.org/2014/01/diagrams-dollars-modern-money-illustrated-part-2.html



Moreover, the principal of monetary sovereignty tells us that the sovereign government never needs, for economic or financial reasons tax revenue to complete the act of spending. All it needs is an appropriation. While $800 billion of TARP money fits that requirement, it's a drop of water when compared to the Tsunami of $29 trillion created, ex nihilo, by Bernanke's exercise of monetary sovereignty in its purest form. " ... It wasn't tax payer money," as Bernanke admitted to Scott Pelley in their "60 Minutes" interview in April, 2009. "We just use our computers to mark up checking accounts banks and others have with us at the Federal Reserve."