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Friday Unfun Links: Bailout Balance Sheet
It's starting to feel like one of those epic nights
at the bar in Washington, DC. You know, the evenings where you know
you're running up a tab much bigger than you intended, but the
bartender has your card, and it's just so easy to order one more
round for the gang.
For those too sozzled or bozwozzled to track what we're spending on on bailouts these days, here's a quick tally:
- $29 billion for Bear Stearns
- $143.8 billion for AIG (thus far, it keeps growing)
- $100 billion for Fannie Mae
- $100 billion for Freddie Mac
- $700 billion for Wall Street, including Bank of America (Merrill Lynch), Citigroup, JP Morgan (WaMu), Wells Fargo (Wachovia), Morgan Stanley, Goldman Sachs, and a lot more
- $25 billion for The Big Three in Detroit
- $8 billion for IndyMac
- $150 billion stimulus package (from January)
- $50 billion for money market funds
- $138 billion for Lehman Bros. (post bankruptcy) through JP Morgan
- $620 billion for general currency swaps from the Fed
- Rough total: $2,063,800,000,000
That's a little over $6,800 for every man, woman, and child, or just under $15,000 for each of America's 140 million taxpayers.
Thanks (but no thanks) to Reason Foundation's Anthony Randazzo for these horrifying numbers, who also says "Oh, and keep in mind that this doesn’t include the hundreds of billions the Fed has and will buy up in commercial paper and lend out to other financial firms."
Geoff Nathan|11.7.08 @ 5:15PM|#
It's OK, because we owe it to ourselves. Or ourselves owe it to
us. Or we owe it to each other. Or something.
Have a good Friday.
Warty|11.7.08 @ 5:18PM|#
What's the better analogy: house of cards, shell game, or
one-armed man juggling chainsaws?
Fuck it, I'm gonna go home and dream about Brady Quinn.
Ska|11.7.08 @ 5:20PM|#
Thank you for actually typing out the full figure numerically -
people have to see what it really looks like, even if we couldn't
comprehend anything in that quantity.
2,063 x 1 billion =
2,063,000 x 1,000,000 =
2,063,000,000,000
Give or take 800,000,000 (800 million). They're not just rhyming
words.
taxpayer|11.7.08 @ 5:21PM|#
But we're going to make a profit . . my congress person told me so . . . .
|11.7.08 @ 5:28PM|#
Fuck it, I'm gonna go home and dream about Brady
Quinn.
Ok, this confuses me. I could have sworn you have said heterosexual
things before. NTTAWWT.
|11.7.08 @ 5:37PM|#
$150 billion stimulus package (from January)
So this the one they already sent out, right? Aren't they talking
about issuing another one? Cause it solved the problem the first
time?
|11.7.08 @ 5:39PM|#
Warty
What's the better analogy: house of cards, shell game, or one-armed
man juggling chainsaws?
Liar's Poker.
One of the Kennedy retards|11.7.08 @ 5:44PM|#
What's the better analogy: house of cards, shell game,
or one-armed man juggling chainsaws?
I liken it to a crack binge. After the 10th pipe you just don't
care about the cost.
Not that a Kennedy would know. Oh, and we never cry.
|11.7.08 @ 5:44PM|#
What's the better analogy: house of cards, shell game, or
one-armed man juggling chainsaws?
Chicken.
Elemenope|11.7.08 @ 5:49PM|#
Chicken.
Game theory FTW.
Also, thanks for posting that list. I wasn't nauseous before, but I
am now. And I was just sitting down to a nice roast beef sub.
You insensitive clod. ;)
George W. Bush|11.7.08 @ 6:01PM|#
I increase annual spending from $1.8 trillion to $3.1 trillion - start a wonderful permanent war, cut taxes to further increase the deficit and devalue the dollar - and you ingrates doubt me now?
|11.7.08 @ 6:07PM|#
It's okay, we'll just start a war with China and cancel our obligations to them!
|11.7.08 @ 6:17PM|#
If I had any money, I would seriously consider shorting Treasury
bonds.
Actually, I might anyway.
Elemenope|11.7.08 @ 6:21PM|#
It's okay, we'll just start a war with China and cancel our
obligations to them!
I know you're joking, but even if you weren't I don't think that
would work. If the US canceled debt obligations to China other
countries holding US bonds and even dollars would lose confidence
in the US honoring it's obligation to pay; they would start
shopping elsewhere.
Colonel_Angus|11.7.08 @ 6:35PM|#
If by some fucked up kind of dumb-ass luck the feds actually do
make a profit (bahahhahahahaah-choke), we can say "good for us, now
let's never try this stupid shit again". But more likely those
pricks will just see it as a good reason to do it again. Because
that is what has been happening for the past 70-plus years.
Government has a fucking gambling problem, and its only dumb luck
that it hasn't majorly fucked us over years ago.
And I'm tired of this shit, "The free market and deregulation is
responsible." Someone has to take down these socialist fucks by
putting the blame where it belongs. Progressive policies like
Community Reinvestment Act, tax tweaking, and the bailout itself
that incentivized this shit in the first place. The banks know they
would get the bailout any time they fuck up. Also, some people need
to start going to jail for blatant fraud. Both the bankers and the
borrowers themselves were knowingly signing bad contracts that lied
about things like income and assets on a regular basis. Yes, I am
actually advocating putting homeowners/borrowers in jail for fraud.
Fuck'em. The kids can go live with their grandparents or
something.
|11.7.08 @ 6:47PM|#
Help Reason celebrate its next 40 years. Donate
Now!
You guys need to get a lobbyist down to Treasury.
Brian C.|11.7.08 @ 6:52PM|#
Most of those funds are being loaned at 5%, which is not a good
rate of return, although AIG's interest rate on the $85 BB credit
line is 11.5% which makes it a better investment.
But they're bellyaching about that rate, the ingrates:
http://seekingalpha.com/article/104778-why-would-treasury-cut-aig-s-interest-payment?source=yahoo
Still, everyone should keep in mind that these funds aren't gone
forever.
Kolohe|11.7.08 @ 6:55PM|#
Quibble: The Indymac 'bailout' is being paid out of Deposit Insurance Fund, money that has already been paid to the govt by banks for such a contigency. And 8 billion is the very high end of the estimated expense to the Fund.
|11.7.08 @ 7:07PM|#
Hey, coal companies must be on "the memo" this weekend, as
TallDave and Argon have both mentioned them.
They figure a lot of coal miners are checking into H&r this
weekend...
|11.7.08 @ 7:13PM|#
Sometimes there's no substitute for a good old-fashioned
Anglo-Saxonism...
FUCK THIS FUCKING FUCK!!! (Insert whatever or whoever you wish as
the object of that sentence - Bush, Obama, Paulson, Bernanke, the
Treasury, the Fed, the Reps, the Dems, Congress, the electorate...
or any combination of the above.)
|11.7.08 @ 7:41PM|#
More CRA wingnut crap from 'Colonel Angus' visiting from Free
Republic.
That shit has been debunked here and elsewhere hundreds of times -
you stupid fucking asshole.
|11.7.08 @ 7:49PM|#
shrike
I hear ya. It's so funny to see that keep coming up, no matter how
much debunked.
I love the "bailout caused the problem" charge as causation as used
by normal human beings usually has a temporal order that makes
sense (the bailout, coming AFTER the problem probably did not cause
it!).
|11.7.08 @ 8:04PM|#
Whichever side your on, this credit crisis is early on in its
cycle.
The scary thing is, the TARP was passed to work out a reverse
auction of MBS/CDO. A week later it morphed into capital injection
for the top nine regulated banks. Now its morphing again.
This current crop of clowns have no idea what to do.
I just hope Obama gets some good advice from Volcker and Buffett.
We are on the edge of ruin.
Colonel_Angus|11.7.08 @ 8:12PM|#
"More CRA wingnut crap from 'Colonel Angus' visiting from Free
Republic.
That shit has been debunked here and elsewhere hundreds of times -
you stupid fucking asshole."
Fuck off. I don't read the free republic. They are conspiracy
morons and bigots and have no problem with government getting in to
shit where it doesn't belong.
I don't know that CRA specifically made the economy worse, I do
know that it is market manipulating regulation. What I am talking
about is all the various incentivising policies from the feds, both
democrats and republicans, that artificially raised housing prices
and made the banks find lending money to deadbeats attractive.
Things like tax incentives for people who own a house, as an
example.
Colonel_Angus|11.7.08 @ 8:20PM|#
"I love the "bailout caused the problem" charge as causation as
used by normal human beings usually has a temporal order that makes
sense (the bailout, coming AFTER the problem probably did not cause
it!)."
The bailout came after the "problem", but the thing is that
corporations have gotten used to this sort of thing, getting free
taxpayer money whenever they go broke. Not anticipating a bailout
would hopefully have caused the banks to think harder before they
do ridiculous shit.
|11.7.08 @ 8:24PM|#
Here you go Colonel
http://www.newamerica.net/blog/asset-building/2008/no-larry-cra-didn-t-cause-sub-prime-mess-3210
I also have one from the WSJ if you prefer Murdoch
publications.
|11.7.08 @ 8:30PM|#
This kills me. The banks were not sure of any bailout (not all
got it). They did what they did under normal market mechanisms and
human psychology. I know that puts a bitty hole in your ideology,
but deal or dangle.
The numbers on the CRA have been repeatedly shown here to be
counter to what you are saying. Kool-aid taste good?
|11.7.08 @ 8:31PM|#
Amazingly, the top originator/holder of jumbo mortgages,
Thornburg (TMA) is functionally insolvent now. (jumbo is $450,000
and up and completely unregulated and had NO CRA
responsibilities.)
TMA also has a low 1-2% default rate.
How did they die?
Leverage abuse and and the credit lockup. They suffered myriad
margin calls on good debt.
This shit is more contagious than Ebola.
Elemenope|11.7.08 @ 8:43PM|#
CED --
I'm not sure I buy that. Using the market is essentially playing
about with incomplete knowledge about the future. Many of the
larger banks, because of their personal/political connections as
well as a sense of "too big to be allowed to fail" probably was
factored into the decision-making process at some level.
I don't, however, believe it was the dominant factor. Most of the
behavior probably was predicated on a false sense of security when
dealing with the shell-game that was securities packaging, coupled
with a lack of capacity or desire to take the long-term view.
|11.7.08 @ 8:46PM|#
the evenings where you know you're running up a tab much
bigger than you intended, but the bartender has your card, and it's
just so easy to order one more round for the gang.
Note to self: party with Katherine.
|11.7.08 @ 8:58PM|#
My ass hurts really bad. I thought it was just a hemorrhoid flair up, but turns out it's another case of gumment dogoody.
Colonel_Angus|11.7.08 @ 9:04PM|#
Yeah, that article kind of claims that CRA did incentivize more
lending and lead to a large increase in property values in certain
areas, which I am sure have dropped back down anyway. Just because
CRA led to some good outcomes for a time, doesn't mean that it
wasn't part of the "house of cards". I'm not saying CRA is solely
responsible, but just that things like that led to more reckless
lending than there otherwise would have been. My original post just
used it as an example.
No matter what, a market like this is bound to collapse anyway. Its
just prices correcting themselves naturally. Some people just end
up getting fucked. The bailouts just dragged more taxpayers in to
it in an attempt to postpone it.
|11.7.08 @ 9:11PM|#
YEEEEEEHAAAWW!
Visions of Hank 'Slim Pickens' Paulson riding a pallet of $100
bills, being dropped over a major American city from one of Ben's
helicopters.
|11.7.08 @ 9:15PM|#
http://www.businessweek.com/investing/insights/blog/archives/2008/09/community_reinv.html
|11.7.08 @ 9:40PM|#
Now you're talking, Colonel.
I heard five commercials an hour from local mortgage origination
hacks from 2003-2006. They were entirely unregulated - no problem
so far.
Problem - the loans they made wound up in MBS packaged by Bear and
Lehman - where they were shoved off on others with a bogus AAA
rating (or worse - retained by them).
No CRA needed.
|11.7.08 @ 10:02PM|#
yeah except we're not drunk, drinking or offering to buy anyone drinks. good analogy otherwise
|11.7.08 @ 10:58PM|#
Only 15 G for me?
No problem. I'll refinance the house with an option ARM and pay my
part. Take note of my fine patriotic example, y'all.
|11.7.08 @ 11:06PM|#
The $700 billion bailout should have been divided and sent to taxpayers--now that would have been a stimulus package. The dollar isn't worth much now so I say lets' just crank up the mint-print out the $100 bills--pay off everyone and finish with a big bang by packing everyone's vehicles. Damn, I would need to make 2 trips, little hybrid won't hold much.
|11.7.08 @ 11:34PM|#
Our economy is in need of a makeover. My computer business is quite contingent on a new command station, a.k.a., a new president running the show in which my 401K can be secure. I can guarantee that I will get a good pension when I retire. That is the good news.
derp|11.8.08 @ 1:11AM|#
Where are they going to get the goddamn money?
No way they can borrow that much on a whim, and they can't just
raise taxes by that much... besides, they are giving all the money
to the rich already, who the hell are they gonna tax?
Are they just gonna print it!? TWO TRILLION DOLLARS. You can't just
PRINT that much money.
|11.8.08 @ 1:27AM|#
Of course they can. They can just print two hundred
$10,000,000,000 notes.
Limited run. Won't take long.
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voxpo|11.8.08 @ 2:04AM|#
CED | November 7, 2008, 8:30pm | #
This kills me. The banks were not sure of any bailout (not all got
it). They did what they did under normal market
mechanisms...
normal market mechanisms. Like cheap
money, massive GSE's, and zoning-induced
bubbles.
|11.8.08 @ 8:36AM|#
LOL, hey, its only money right? LMAO, fire up the printers and
print more cause the crappy US automakers are already knocking at
the door wanting another free handout!
Jess
http://www.Ultimate-Anonymity.com
|11.8.08 @ 1:10PM|#
Here you go Colonel
http://www.newamerica.net/blog/asset-building/2008/no-larry-cra-didn-t-cause-sub-prime-mess-3210
I also have one from the WSJ if you prefer Murdoch
publications.
Nice try, but it forgets the additional reforms to the CRA passed
by the Clinton administration (granted, with the complicity of the
Republican-controlled Congress) in 1995 that actually gave Fannie
and Freddie the capability to purchase and bundle these mortgages,
creating a moral hazard for these banks (after all, it wasn't their
money they were directly using to make the loans anymore...). Then
Fannie and Freddie more or less guaranteed these bundled loans to
be a higher quality investment vehicle than they really were (or
else nobody would have bought them and the government would have
basically bought all this toxic debt directly). Ultimately, housing
prices fell, which ended up throwing everything out of whack with
these loans, and many homeowners (through either being unable to
keep up with an adjusting rate on their mortgage or the incentive
of finding a cheaper place to live in) now had a reason to bail on
these bad loans.
So, at last count, we have two government actions of meddling in
the housing market (the first two possibly helping create the
unnatural rise in housing prices in the first place), then a normal
business cycle correction takes over, shows how empty the
government's actions were...
...and the politicians start blaming the free market system for
exposing their charade for the Wizard of Oz "pay no attention to
the man behind the curtain" tripe that it actually was.
Do you think your average Congressman could survive the typical
Public Finance or Intermediate Microeconomics class? I somehow
doubt it... this only being Exhibit #32768 why that's the case.
Charles|11.8.08 @ 1:15PM|#
it would not be the worst thing in the world to have those little turing boxes for posting comments.
PC|11.8.08 @ 1:23PM|#
"That's a little over $6,800 for every man, woman, and child, or
just under $15,000 for each of America's 140 million
taxpayers."
A lot of people would be able to get out of debt, thus inject
liquidity into the system if they got the "money" instead of these
welfare queens.
|11.8.08 @ 2:06PM|#
thus inject liquidity into the system if they got the
"money" instead of these welfare queens.
Or, alternatively, this little thing called "inflation" would chew
up any anticipated liquidity.
When are we going to get it? You cannot spend and borrow your way
out of everything.
Mike Laursen|11.8.08 @ 3:49PM|#
Are they just gonna print it!? TWO TRILLION DOLLARS. You
can't just PRINT that much money.
Can somebody succinctly explain all of the ways in which our
government actually inflates the currency? Somebody was asking me
the other day whether the government literally causes inflation by
printing money. I said I didn't think the government had to
literally print money, since they rely on mechanisms like lowering
Federal lending rates spurring banks to actually issue the increase
in money supply. But I don't understand the details as well as I'd
like to.
Bingo|11.8.08 @ 8:21PM|#
Mike:
From what I understand, most of it is done electronically, with
only some percentage of the money actually appearing as cash.
|11.8.08 @ 8:50PM|#
Can somebody succinctly explain all of the ways in which our
government actually inflates the currency?
Does this
graph help?
Mike Laursen|11.8.08 @ 8:53PM|#
Bingo, I'm not so much looking for answer of electronic vs. paper, as what specific financial transactions the government engages in to create money out of nowhere. E.g. extending credit to banks, or issuing treasury bonds, etc.
Bingo|11.9.08 @ 3:13AM|#
Mike:
Don't really have a concrete answer for you, but in my mind I
picture Sec. Paulson logging onto https://treasury.gov with a
cocktail in his hand. Probably some espensive whiskey or maybe he's
slumming it with some aged potato vodka mixed with cranberry juice.
After typing in his user name and password, he puts in his dad's
birthday, mom's maiden name, and color of his first car (brown, of
course).
Then he clicks on "Transfer money" and chooses the amount and the
recipient (in this case a large bank) from the drop-down
menu.
Essentially, it's the exact same procedure that I do to pay for
rent except that his balance says
$-2,063,8wh,ate,ver,the,nat,ion,ald,ebt,is.02 and mine says
$4.25.
Bingo|11.9.08 @ 3:31AM|#
Err, basically (after authenticating) the bank system simply
adds the dollar amount to its balance and the fed system simply
subtracts the dollar amount.
Maybe some bankers or economists can weigh in further, but I would
hazard that the nuts-and-bolts of it are probably exactly what I
described.
Mike Laursen|11.10.08 @ 1:15AM|#
Oh, come now, Bingo, guys like Paulson have somebody to log in for them.
Mike Laursen|11.10.08 @ 2:18AM|#
Anyway, after a little reading (which is a dangerous thing), the
answer to my question seems to be that the primary mechanism of our
government "printing money" is for the Federal Reserve to buy
Treasury securities up on the open market, using funds created from
nothing.
This is done as part of the Federal Reserve's mission "to furnish
an elastic currency". Apparently, they do more letting out of the
elastic waistband than they do tightening of it.
jtuf|11.10.08 @ 6:16AM|#
So after fighting "evil" big corporations all my life, the Democrat controlled congress just raised the national debt (that's right, not the deficit, but the total cumulative debt) arround 18% in less than a year so they could give big corporations our money. It's like the sadist who gives his victim life saving surgery after a car accident, because he hates the idea of anyone but him hurting the victim. Then after the surgery, the sadist hands the hospital bill to his neighbor's kids to pay off.
|11.10.08 @ 8:30AM|#
This article is misleadingly written. It conflates currency swaps with the bailout. Currency swaps are within the normal range of monetary policy operations, and do not expose the Fed to counterparty risk in the same way that buying CDO's does. To imply otherwise either shows a lack of understanding of the Fed's operations or a willful intent to mislead.
|11.11.08 @ 5:30PM|#
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