Sunday, September 21, 2008

The current cost of the bailouts

Back in March, I thought the $30 billion to bailout Bear Stearns was a lot of money. But the way these drunken sailors politicians are spending money, that seems like Monopoly money. The NYTimes' gives a recap of some bailout numbers here (by DAVID M. HERSZENHORN):

A $700 billion expenditure on distressed mortgage-related assets would roughly be what the country has spent so far in direct costs on the Iraq war and more than the Pentagon’s total yearly budget appropriation. Divided across the population, it would amount to more than $2,000 for every man, woman and child in the United States.

Whatever is spent will add to a budget deficit already projected at more than $500 billion next year. And it comes on top of the $85 billion government rescue of the insurance giant American International Group and a plan to spend up to $200 billion to shore up the mortgage finance giants Fannie Mae and Freddie Mac...

A program to help troubled borrowers refinance mortgages — along with an $800 billion increase in the national debt limit — was approved in July. But financing for it depended largely on fees paid by Fannie Mae and Freddie Mac, which have been placed into a government conservatorship.

So that's:

$30 billion - Bear Stearns
$200 billion - Fannie Mae / Freddie Mac
$85 billion - AIG
$800 billion - mortgage refi's
$180 billion - money markets
$700 billion - currently proposed


Just a smidgeon under $2 trillion so far. NBD.

And of course, even after the White House & Congress Rubber Stamp Paulson's current bailout proposal... there are no guarantees that China and others will have "confidence" in the US dollar.

What does that mean?

Well, if China (and others) is still uncertain about the dollar, they can sell their treasuries and get reimbursed for all the money they've been loaning us for years. And if they do that, the dollar could enter a free fall.

What does that mean?

$4 gas will look like a bargain.

Or Paulson's gamble may work and the dollar may stabilize. And while that sounds good...

Who is going to pay off that new $700 billion in debt?

I think we all know the answer to that one.

The Democratic landslide of 2006 didn't really clean house. Ignoring party affiliation, I hope a whole bunch more of the old-timers get booted this year.

Tim White

* Is this an accurate reflection of the bailouts? It's hard to keep track of them all.


Anonymous said...

Obivously Wall Street is an expensive quagmire and we must withdraw Americans from there immediately.

Notice by the way, Barack Obama supporter Warren Buffett made $3B in two days last week betting that Bush was going to bail out Wall Street?

Meet the new boss, same as the old boss

tim white said...

There's an argument that big business benefits from the increased regulation that will result from this mess.

Small business will find it much more difficult to dedicate the resources to address the new regulation. Hence, small business loses and big business benefits from the reduced competition.