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Home Front Economy
Bailout payout tops $8 trillion
2008-12-18
As the holiday season commences, it's worth taking stock of the last gift that President George W. Bush and the 110th Congress have left for U.S. taxpayers.

It's a package of about $8.7 trillion dollars' worth of potential taxpayer commitments for loans, guarantees and other bailout goodies for businesses and distressed homeowners.

Amid the tissue paper:

  • More than $1.5 trillion in Federal Deposit Insurance Corp. loan guarantees, including a $139 billion assist to the lending arm of General Electric Corp.

  • $1.8 trillion in cash, tax breaks and loan guarantees doled out from the Treasury Department to taxpayers, financial institutions and credit companies.

  • $300 billion for homeowners from the Federal Housing Authority.

  • $25 billion in assistance for auto companies from a program overseen by the Energy Department, which is separate from the bailout proposal that tanked last week in the Senate.

  • And $5 trillion worth of new money, loan guarantees and loosened lending requirements from the Federal Reserve Bank.

    According to Bianco Research President James Bianco, who crunched these numbers, that amounts to more government aid and assistance than nine other historic bailouts and big government outlays combined.

    The New Deal, for instance, cost an estimated $32 billion in its day, which would be about $500 billion in today's dollars. The Marshall Plan cost about $12.7 billion, which is the equivalent of a paltry $115.3 billion. The Louisiana Purchase? The French got $15 million, which would be worth about $217 billion today.
    • Posted by:Fred

    #10  We could just erase it...
    Just saying...
    Like be pirates...
    Why do we always have to be the good guys?
    Posted by: 3dc   2008-12-18 21:33  

    #9  The major problem is that so many eggs were placed into one basket ... US mortgage loans. Those loans were re-packaged into other securities (derivatives) and re-sold around the world. When US housing values fell, the the mortgages and the derived securities became worthless.

    This wiped out the pool of assets that they were lending against for both consumer and business loans. Things are not going to get better until the mortgages go back above water.

    One way for banks to get those mortgages back above water and stop the depreciation in housing is to take houses the banks currently own and raze them. Scrape the lot and sell it as a building lot instead of a house. If the house on the lot is over 10 years old, scrape it.
    Posted by: crosspatch   2008-12-18 12:00  

    #8  Brewster's Trillion.
    Posted by: swksvolFF   2008-12-18 11:57  

    #7  More than a little misleading. The vast majority is in guarantees and has not been paid out.
    Posted by: DoDo   2008-12-18 11:41  

    #6  The other long term effect will be that now large corporations know the govt will come running to their rescue if they get into trouble.
    Why not make highly leveraged bets on the riskiest but most potentially profitable options available?
    You'd be a fool not to now.
    Posted by: bigjim-ky   2008-12-18 10:16  

    #5  Either way, it is a lot of debt that right now we can't afford to pay back. So the government will raise taxes, which will cause more job loss, which will cause more loss of tax receipts, which will mean the government will want to raise taxes more, etc., etc.
    Posted by: DarthVader   2008-12-18 09:53  

    #4  What's giving the Feds nightmares is that private sector gross debt is 290% of GDP. The Govt has to take a position in favor of negative real interest rates i.e. in favor of borrowers and against lenders.The problem is that deflation ruins their evil designs, when interest falls below zero. They then have to resort to fiscal measures ( because they've run oyt of monetary options) , which effectively will cause inflation to soar, see Zimbabwe.
    This is where the helicopter comes into play.
    Posted by: tipper   2008-12-18 02:57  

    #3  To put this in perspective, the US federal government debt is $10 trillion. Of which $4.2T is debts it owes itself, mostly pension and SS obligations. So net debt is $6.2T.

    $10T = about 60% of GDP.

    As Japan has shown, governments can carry high debt levels for a long time as long as interest rates remain near zero.

    Once interest rates rise to 'normal' levels interest payments becomes a crippling burden on government and there is no way they can pay back high levels of debt.

    BTW, conventional wisdom is that once government debt passes 125% of GDP, it cannot ever be repaid and default is inevitable.

    List of countries by public debt as %age of GDP
    Posted by: phil_b   2008-12-18 01:47  

    #2  The dollar will be okay. It tanked today but that is expected because the dollar generally follows US interest rates. Interest rates tanked due to the fed action yesterday, so the dollar tanked today.

    When the fed raises rates again, the dollar will increase.
    Posted by: crosspatch   2008-12-18 01:34  

    #1  $8x10^12/3x10^8 people =$26,667 for every man, woman, and child in the US. We are well and truly f*cked, even the illegals among us. They can't leave now; they owe too much. This is absolute madness. Thanks, Congress for doing what Bin Laden tried, but could not do---destroy the economy and the currency.

    The Congress is the true enemy of this country.
    Posted by: Alaska Paul   2008-12-18 00:52  

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