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Bailout Price Tag: $3.5T So Far


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Bailout Price Tag: $3.5T So Far, But 'Real' Cost May Be Much Higher

Posted Nov 12, 2008 10:16am EST by Aaron Task in Newsmakers, Recession, Banking Related: AIG, FNM, FRE, XLF, ^DJI, ^GSPC, CWhile the government is clearly spending a lot of taxpayers' money to bail out financial firms, the tally is even bigger than most Americans (economists and pundits included) are probably aware or willing to admit.

 

The bailout bonanza has gotten so big and happened so fast it's the true cost often gets lost in the discussion. Maybe Hank Paulson and Ben Bernanke prefer it that way because the tally so far is nearly $3.5 trillion, and that's before a likely handout for the auto industry.

 

Yes, $3.45 trillion has already been spent, as Bailoutsleuth.com details:

 

  • $2T Emergency Fed Loans (the ones the Fed won't discuss, as detailed here)
  • $700B TARP (designed to buy bad debt, the fund is rapidly transforming as we'll discuss in an upcoming segment)
  • $300B Hope Now (the government's year-old attempt at mortgage workouts)
  • $200B Fannie/Freddie
  • $140B Tax Breaks for Banks (WaPo has the details)
  • $110B: AIG (with it's new deal this week, the big insurer got $40B of TARP money, plus $110B in other relief)

Tallying up the "true" cost of the bailout is difficult, and won't be known for months if not years. But considering $3.5 trillion is about 25% of the U.S. economy ($13.8 trillion in 2007) and the U.S. deficit may hit $1 trillion in fiscal 2009, hyperinflation and/or sharply higher interest rates seem likely outcomes down the road.

 

At the very least, the possibility of the U.S. losing its vaunted Aaa credit rating -- which determines the Treasury's borrowing costs -- cannot be discounted.

 

Moody's has already said it's not in jeopardy of being lowered. But we really can't put much stock in what Moody's -- or S&P or Fitch -- say after the subprime debacle, can we? More importantly, the price of credit default swaps on U.S. government debt has been on the rise since the bailout train got rolling, as Barron's reports.

 

all I can say is, ouch..........

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We cannot afford to not have a bailout. Allowing the market to correct itself would take down the entire American economy.

 

 

Endless bailouts will take a short severe recesssion and turn it into a long term depression . Sooner or later America will have to take its medicine. Our government spends money it does not have and our fellow citizens have spend money they did not have . It is time to stop this madness and live with our means. Jesus Christ not everyone is this country is ENTITLED to have a big house or a nice car .

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I'm starting to think that this bailout will become more synonymous with the Bush Administration than even the Iraq War or Abu Ghraib in 20 years.

Hey, it was the Democrats who passed this mess for Bush, not the Republicans. Pelosi and Bush should both be thrown in prison for outright theft, which is what the bailout is.

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I'm starting to think that this bailout will become more synonymous with the Bush Administration than even the Iraq War or Abu Ghraib in 20 years.

Hey, it was the Democrats who passed this mess for Bush, not the Republicans. Pelosi and Bush should both be thrown in prison for outright theft, which is what the bailout is.

 

 

 

the republicans also mislead the democratic congress and american people about what the money was for.

 

 

but then again they have been misleading us for 8 years now, why stop now?

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I'm starting to think that this bailout will become more synonymous with the Bush Administration than even the Iraq War or Abu Ghraib in 20 years.

Maybe if this policy was unique to the Bush administration. The Democrats pushed the bill and continue to push for more. President-Elect Obama supported it, and still supports more bailouts for poorly-run businesses, so unless he plans on doing a full 180 and suddenly opposes "saving American industries" at our expense, this will be the hallmark of the Obama administration, assuming this doesn't manage to get us in even more trouble.

 

Can we afford to have masses of giant companies failing, making millions and millions of Americans jobless while severely hampering any possible turnaround?

Those companies are failing anyway. They continue to lay off workers year after year no matter how much government money they are given. Part of the problem with this policy is the mistake of arrogance amongst government officials who actually think that they can correct this problem by writing a check or even thinking they can run the auto-businesses. They can't. Let the company go bankrupt and force the people in charge to correct their problems or sell the companies to people who will, because taking money from responsible people and viable businesses and giving it to a business that isn't viable is not a solution.

 

 

Hey, it was the Democrats who passed this mess for Bush, not the Republicans. Pelosi and Bush should both be thrown in prison for outright theft, which is what the bailout is.

 

the republicans also mislead the democratic congress and american people about what the money was for.

 

 

but then again they have been misleading us for 8 years now, why stop now?

If by "the republicans" you mean Hank Paulson, then yes, he did mislead the Congress. You would think after all this time though that intelligent people would have stopped trusting the Bush Administration...

But I certainly hope you're not trying to pin blame on the majority of Republicans who actually voted against this thing.

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