That $700 Billion Wall Street Bailout May Be Closer to $3 Trillion
| Tue Nov. 11, 2008 10:50 AM PST
How much will the Wall Street bailout cost? Remember that the widely-used number was $700 billion. Well, it may be over three times that amount. Bailoutsleuth.com reports that the actual (and perhaps rising) price tag now stands at over $2 trillion:
Adding together the $170 billion that the Treasury Department has currently agreed to provide banks in additional capital, the $150 billion that the Treasury Department and the Federal Reserve are providing to AIG and the $2 trillion that the Federal Reserve has provided banks in emergency loans brings the total assistance to $2.32 trillion.
If the estimated savings from the new tax breaks are included, the assistance would climb to $2.46 trillion. That total does not include other measures not focused directly on banks, such as Treasury Department's $200 billion in support for Fannie Mae and Freddie Mac, and the Federal Housing Administration's $300 billion HOPE for Homeowners program.
Add all of that together and you reach almost $3 trillion. (How many solar panels can you buy for that?) Remember that Bill Clinton came into office and he and his aides encountered deficits much bigger than expected. What's going to happen when Obama moves into the White House and has to contend with the real cost of the so-called rescue? (Yes, the Treasury is supposed to get some of this money back--eventually.) By the way, to provide some context, the current (and falling) GDP of the United States is $14.4 trillion. The total bailout tab is over one-third of the nation's entire output of goods and services.
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Comments
David,
You're being misleading here in counting loans as "bailout" funds, especially in suggesting that these are out-of-pocket expenses. A loan must be paid back, with interest. Similarly, when the government buys stakes in banks (as Treasury has been doing) the government is simply converting assets from one type (cash) to another (a secured interest in a bank). So, don't be so dismissive of the fact that "Treasury is supposed to get some of this money back"--that's the whole point.
Sweden did something very similar to the best parts of the bailout in the 1990s to save its financial system, and it worked out well. The Swedish government bought the banks when they were about to collapse, and then re-privatized them years later once the crisis was over. The net cost to the Swedish taxpayer was quite negligible, and indeed, some argue that the Swedish taxpayers came out ahead in the deal by buying bank assets as firesale prices and selling them later at a profit. That's the plan for our banks, too, at least in part.
We should absolutely keep close tabs on how the bailout moneys are used, and be very aware of an involved in making sure that the taxpayer gets the most value possible, but it's misleading to your readers to suggest that somehow the government is just giving money away. It's not, at least not here.
By the way, it's also misleading to claim (as you do) that the less than three trillion dollars you count as bailout is equal to "over one-third" of our $14.4 trillion in GDP--check your math; even using your figures, it's more like less than a fifth. ;-)
I was under the impression that Congress debated the bailout and then laborious it legislated it, but apparently I was wrong. Not only have the agencies distributing our national treasure torn up that legislation and ignored specific aspects of it, but they've also handed out 2 Trillion additional dollars that they refuse to reveal the whereabouts of. Who gave them carte blanche to do whatever they want to, whenever they want to? What happened to "oversight"? If the Congress can't enforce the rules it draws up for agencies who seem to be acting as rogue tooth fairies, they ought to shutter the House and Senate and go home.
See Zack, the real caveat here is the question of who is going to pay these loans back if AIG etc collapses. I know that they were allowed to turn in a fistful of 'distressed assets' as collateral, but what happens when those assets become worthless because no one is willing to buy them?
I have yet to hear exactly what kind of assets have been turned in, but methinks they are using the mortgage backed securities. These, as best as I can understand, are valuable in and of themselves as streams of revenue from the homeowners, but only if those homeowners are able to pay for the homes they are living in. This always leads me back to the question of why on earth aren't they looking at the root of this problem and helping secure the value of these securities by securing the income streams that underlie them?
Throwing this money to AIG is like throwing steaks overboard into shark infested waters.
They will never be enough steak, and the sharks will just breed more sharks.
This is, by far(and that is saying something), the stupidest idea ever by the federal government.
I get that "something" had to be done, but does it strike anyone else that filtering money through these institutions as one of the most inefficient ways to get money into the economy. Really, aren't these banks charging a 10% fee which they pay to themselves in the form of bonuses?
I think all the high-finance people have been Smoking The Big Dope for years, and it's time for em all to go pee in the little cup, there, and, as soon as we're positive that the majority of them are actually SOBER, then get about the business of repairing/bailing out/obsoleting the 'financial services industry', and the first place they can start is by having a mini-session before Congress, talking about the maximum interest that can be charged against any credit cardholder under any circumstances, and how it is that americans end up paying mortgage interest to parties outside our country(and taxes, too, if you consider that federal tax reciepts get used to satisfy T-bills and other government securities which are held abroad). I can't speak for anyone else, but I'm tired of the pay, pay, pay, I've done enough of that over the last 2 decades in the workforce, I've cut up my last credit card, I'll buy my next car CASH, even if it's just a thousand-dollar clunker, or maybe even a motorcycle, they're pretty good on gas...but as far as investing in the market? As soon as I can figure out how much of my IRA will be left after the IRS gets whatever it is they're after(we're only talking 10k, here, and they want back taxes from me, I'm about ready to just go sign it over to em and have done with it, better to know you don't have any money than the illusion that you do, there), I'm taking it out of the bank and closing that account. After that, it'll be the first bank of ME, I'll even pay myself interest, and there won't be any monthly fees there, sparky! LOL
Anyway, just thought I'd take the opportunity to vent my spleen at institutions like AIG, they had to be bailed out TWICE, flippin' shut THAT financial house of ill repute DOWN! Then they can start working on 'health insurance' and the offshore 'fun' that goes on, there. Let them eat mortgage-backed 'securities'! LOL
Bonjour~ts converter for
Submitted by Video Converter OS X (not verified) on Mon May. 11, 2009 6:07 PM PDT.
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