$350 Billion, Not $2.5 Trillion
$350 billion dollars is a lot of money. And that’s how much the Treasury committed yesterday. Not $2.5 trillion. A headline like “Bailout Plan: $2.5 Trillion and a Strong U.S. Hand” is pretty misleading. The article text is (as is often the case) better:
Administration officials committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money.
We shouldn’t sneer at $350 billion. Eighteen months ago there were lots of social welfare that Barack Obama (or Hillary Clinton or John Edwards or Bill Richardson) could have embraced to endear himself to Democratic Party primary voters except advisers would come back and say “Senator, that’ll cost $350 over ten years—we can’t do it.” But it’s a much smaller number than $2.5 trillion.
46 Responses to “$350 Billion, Not $2.5 Trillion”
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February 11th, 2009 at 8:23 am
Shit, if it costs $350 over 10 years I’ll pay for it.
February 11th, 2009 at 8:25 am
It is not so clear that the guarantees and insurance/assurances will be cost-free or profitable.
I haven’t the time or inclination to go over the Fed balance sheet or committments (Freddie & Fannie?) right now. Maybe somebody else can look gor links.
February 11th, 2009 at 8:27 am
Forgive me but where does the Fed get the TRILLION$$$ that they are committing?
Oh right, the US Treasury! Get those presses running!
Where are your careful calculations of what that deficit spending and Weimar lite currency devaluation will cost the US citizen?
Isn’t it true that odds are good that over 10 years we will be looking at well over 10 Trillion what with interest and all?
Really, what’s the point of your weak rearguard action?
The markets have spoken!
The black progressive president has fucked up the economy!
See how silly you sound?
February 11th, 2009 at 8:29 am
“and the rest coming from … the Federal Reserve”.
Well, OK then!
February 11th, 2009 at 8:32 am
Aw hell.
Fannie, Freddie May Tap US Treasury for $51 Billion …Reuters, Jan 27, 2009
AIG has been back to the trough repeatedly.
Are you certain of the short or medium term costs, Matt?
February 11th, 2009 at 8:37 am
Hey, Matt, the Iraq war will pay for itself!
Remember that song and dance?
February 11th, 2009 at 8:45 am
When you count all the UNFUNDED GUARANTEES and LOANs that the Federal Reserve has made, this little fucking bailout is running around $9.7 TRILLION. Why doesn’t Matthew note that — is he ignorant or did Podesta ask him to keep it quiet?
See http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aGq2B3XeGKok
February 11th, 2009 at 8:48 am
I’ve been smacking the shit out of the New York Times in their comments sections over them covering up/concealing the cost of Manhattan’s bailout. SO even they are starting to admit the truth — but in little ass-covering sidebars, not in front page articles. The Times says the Bailout cost is really a mere
$8.8 Trillion.
See http://www.nytimes.com/interactive/2009/02/04/business/20090205-bailout-totals-graphic.html
February 11th, 2009 at 8:52 am
Of course, the card that both Democrats and Republicans have been palming is the $Trillions in unfunded guarantees and loans that the Fed has been making.
They will probably argue that the guarantees won’t require any taxpayer money unless things go South. As I recall, the Democrats were making similar claims about the government not REALLY being on the hook for Fannie Mae /Freddie Mac’s actions — right up until the point the Democrats decided that yes, we were and pissed away another couple hundred $Billion of our tax dollars. Remember.
February 11th, 2009 at 8:57 am
One might wonder why our bearded progressive insurgent has been so mum about the huge costs of this bailout — why he hasn’t been shouting alarms from the rooftops.
But the little people haven’t heard a peep from our little Tribune. A cynical person might wonder if that condo in Virginia had a price on it. Or if the Yglesias fortune is holding some bank stocks that are underwater at the moment.
Petey warned us — put not your trust in trustfund scumbags.
February 11th, 2009 at 8:57 am
Matt, you know the Federal Reserve is part of the government, right?
February 11th, 2009 at 9:07 am
This is what officials apparently call “the headline number”.
In other words, the biggest, most sensationalist number the reporters can come up with without being technically inaccurate.
February 11th, 2009 at 9:07 am
Of course, the REAL cost of this corrupt bailout is OPPORTUNITY Cost. SIX MONTHS ago I argued her that the Government needed to set up NEW Good banks to loan to the real economy and to isolate the real economy from the AIDS-infested bad banks.
FT’s Willem Buiter agrees with that proposal –and notes that several other prominent investors/economists do as well.
From http://blogs.ft.com/maverecon/2009/02/good-banknew-bank-vs-bad-bank-a-rare-example-of-a-no-brainer/
“It is therefore comforting that the logic behind my proposal (January 29, 2009) for one or more new ‘good banks’ to be established, capitalised with public money and with additional financial support from the state for new lending and new funding, while the toxic assets of the old banks are left with the owners and creditors of the ‘legacy banks’, is being echoed in proposals from Joseph Stiglitz (February 2, 2009), George Soros (February 4, 2009) and Paul Romer (February 6, 2009), to name but a few. I claim no authorship or originality for the ‘good bank’ proposal. The idea is obvious and no doubt was floating around the blogosphere and elsewhere as soon as the magnitude of the ins ”
———
“Floating around the blogosphere”. Well, it was floating around here. But not in Matthew posts — but in the great unwashed comments section.
February 11th, 2009 at 9:15 am
So why didn’t the New GOod Banks get set up? Well, since they didn’t yet exist, they couldn’t bribe Obama and the Democratic Congress. Whereas the bad banks threw tons of money to the Democrats — just check out money coming into the recent from JP Morgan, Citibank,etc.
The COST of this corruption , however, is a Second Great Depression. We didn’t forestall that because we pissed away $9 TRILLION in trying to recoup the gambling debts of the superrich instead of trying to save real businesses that create real products — the food we eat, the clothes we wear, the electricity that keeps our houses warm, etc.
February 11th, 2009 at 9:34 am
Citibank has dumped almost $10 Million into the Democratic Party in the past several elections, according to OpenSecrets:
http://www.opensecrets.org/orgs/summary.php?id=D000000071
Republicans have also gotten a big chunk of loot as well.
February 11th, 2009 at 9:46 am
Of course, any questions re why we are bailing out the Bad Banks are resolved when we look at Open Secrets top Donors list and who they predomintly give to:
http://www.opensecrets.org/overview/topcontribs.php?cycle=2008
February 11th, 2009 at 9:52 am
So when you see the Democratic members of Congress giving Bank CEOs a tongue-lashing in public today, remember that those CEOs gave those same Congressmen roughly $25 Million in the recent election.
That might help you visualize the different kind of tongue-lashing those Congressmen give those CEOS in private.
Hey, if someone was handing me $10 Trillion of the taxpayers money, I could take some verbal abuse and pretend to look contrite as well.
February 11th, 2009 at 10:22 am
Hey, DTM, someone has to provide the FACTS in this matter — you sure haven’t.
If you agree to pick up the $10 Trillion tab –NOT $350 Billion tab — for this mess, I’ll turn off the rant mode.
February 11th, 2009 at 10:42 am
The private sourced part of the $2.5 trillion is a mystery. Besides whatever that is and the $350 billion in TARP money then what are they talking about?
Two things. Number one is direct Fed monetizing. The Fed can continue to buy up debt based financial instruments and pay for it by printing the money. The other is for the Treasury or the Fed to give guarantees against losses on that paper held by others. They have been doing this already.
Any Treasury guarantee is just a figment of imagination. Congress will never appropriate money, which the Treasury would then borrow, to bail out banks and other financial intermediaries. The entire thing is a con. I suppose the Treasury could get the spending authorization on the condition they would raise the money by having the Fed monetize but that seems far fetched for now.
So what it comes down to is how much is the Fed going to print and what is that going to do to the markets and the economy? What will it do to interest rates and currencies? It is impossible to predict.
What they want is to have the money reinflate assets. In other words to make things right again, just like before. It is insanity. Making the error of trying to save old fixed costs we are dooming any possible reform of the system. As others have noted this is no change at all. Which means it is going to be a political disaster of monumental proportion. Which is part of the feedback loop which is making the markets and the economy worse.
Ultimately the authoritarians will pick up the pieces.
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