Potential Cost of the Bailout? $8 Trillion?!
Today, the public seems to be greeting the Fed's new $800 billion bad debt repurchase and consumer credit support plan with a ho-hum. Maybe they think it's part of TARP, but it is an additional $800 billion of taxpayer money being allocated to staunch the credit crisis. And yesterday, the reported $300 billion + bailout of Citigroup was also met with the same ennui. The markets reacted positively, because these days "no news is bad news" and "good news is good news because it is so rare".
The public is being hit by a new bailout number daily... the media didn't seem to be doing any accounting. Well, CNBC did a swift calculation and produced a "potential" bailout figure of over $8 TRILLION. What's surprising are the potential backstop items that aren't specifically revealed to the public in their scope. The following table itemizes events that most of the public will recognize in yellow and the potential backstop and obscure items in blue:
|
|
Above the line: what you know about |
|
|
Nov 25 |
Special bad mortgage debt buyout |
$600 billion |
|
Nov 25 |
Consumer credit support |
$200 billion |
|
Nov 24 |
Citigroup bailout of bad assets |
$250 billion |
|
Sometime before Jan 20 |
Obama's fiscal stimulus plan |
$500-$700 billion |
|
Oct 3 |
TARP |
$700 billion |
|
Sept 16 |
AIG bailout |
$152 billion |
|
Sept 7 |
Fannie/Freddie bailout / backstop |
up to $200 billion |
|
~ |
Fannie/Freddie increased backstop |
up to $144 billion more |
|
July 30 |
FHA housing rescue bill |
$300 billion |
|
Mar 14 |
Bear Stearns bad debt backstop to facilitate JPMorgan Chase acquisition |
$29 billion |
|
|
Below the line: hidden backstops and obscure items |
|
|
Oct |
Fed purchases of commercial paper. $270 billion used as of 11/19 |
up to $1.8 TRILLION |
|
|
FDIC guarantees |
up to $1.9 TRILLION |
|
|
Fed Term Auction Facility to meet bank credit needs. $415 billion credit extended |
up to $900 billion |
|
|
Credit
extended to banks and broker dealers through Discount Window.
Theoretically unlimited line, $296 billion extended as of 11/19. |
$296 billion |
|
|
Unlimited temporary Fed currency swap lines with other Central Banks |
$165 billion |
|
|
Exchange Stabilization Fund to guarantee money market mutual fund principals |
$50 billion |
|
|
Treasury purchases of mortgage backed securities |
$27 billion |
|
|
Local community grants to repair abandoned homes due to foreclosures |
$4 billion |
That Bear Stearns bailout of $29 billion back in March sure looks quaint now.
Hey Pat,
I've got $5,000,000 Deutsche Mark bills that were printed up in the 1920's ...Looks like we'll soon have the same thing for Dollar Bills.
http://www.sjsu.edu/faculty/watkins/hyper.htm
We'll need some more printing presses and hopefully we don't run out of ink and paper. Have a Great T-Day...
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