Notable and Quotable

Posted by Kendall Harmon

How did they come up with 700 billion dollar figure for the bailout?

"It's not based on any particular data point," a Treasury spokeswoman told Tuesday. "We just wanted to choose a really large number."


Filed under: * Economics, PoliticsEconomyThe September 2008 Proposed Henry Paulson 700 Billion Bailout Package

Posted September 29, 2008 at 12:50 pm [Printer Friendly] [Print w/ comments]

1. Jeffersonian wrote:

Well duh…we didn’t (and don’t) know the value of these MSBs, so how can we estimate how much they will cost us?  By inserting itself into the market process, the federal government has actually prevented this data from coalescing.

September 29, 2:02 pm | [comment link]
2. Clueless wrote:

Possibly, instead of choosing a “really big number” to stick the US taxpayer with, our elected representatives, when bailing out their buddies should choose a “really small number” instead.

zero comes to mind.

Just a thought.

September 29, 2:29 pm | [comment link]
3. Brad M wrote:

The point of this plan is to avoid a meltdown in the credit markets starting with the short-term lending between financial institutions.  If that dries up, all the credit markets will likely freeze up.  The number, obviously is at best an educated guess rounded up to the nearest 100 billion or so.  It needs to be big enough to cover the potential problems. 

There is no alternative and I pray the House votes for it in the next 8 minutes or so. 

Back to Cspan!

Brad Miter

September 29, 2:39 pm | [comment link]
4. Byzantine wrote:

The point of this plan is to avoid a meltdown in the credit markets starting with the short-term lending between financial institutions.  If that dries up, all the credit markets will likely freeze up.

When you and I shift money around and play tricks with leverage to keep the game going, they call it check kiting.

September 29, 2:55 pm | [comment link]
5. Clueless wrote:

The credit markets need to freeze.  Yes we will have a Depression.  If the bill goes through, the Depression we will have, which is inevitable will last two decades, not one decade, and will impoverish our children, who deserve better than this.

Notice how none of the TV stations are showing the hundreds of folks on Wall Street protesting the bail out.—-what-the-news-media-isnt-showing-you

This is a shameful day for US democracy.  Both our leaders and the press have sold themselves and us to the bankersl

September 29, 3:00 pm | [comment link]
6. Jeffersonian wrote:

The credit markets aren’t going to freeze…banks and institutions that didn’t play these games with Fannie and Freddie are in fine shape, thriving in fact.

September 29, 3:05 pm | [comment link]
7. Clueless wrote:

This article suggests that the reason for the indecent haste, and the strong arming of Congress to pass the bail out, together with the completely ridiculous invoking of “martial law” rules, and suppression of any filming of dissent on Wall Street is because


This back door blank check is to recapitalize the Federal Reserve, which has already spent money it didn’t have which Congress didn’t authorize.

Instead of going into bancruptcy, (which would involve identification of those responsible, and “claw back” for ill gotten gains, the administration is trying to cover up what they have already done.

From Brad Setser “Follow the Money” 

“In the last two weeks — if I am reading the Federal Reserves’ balance sheet data correctly — the Fed has:

Increased “other loans” to the financial system by around $230 billion (from $23.56b to $262.34b);

Increased its “other assets” by about $80b (from $98.67b to $183.89b);

Increased the securities it lends out to dealers by $60b (from $117.3b to $190.5b);

That works out to the provision of something like $370b of credit to the financial system in a two week period. That may be a bit too high: the outstanding stock of repos felll by $40b (from $126b to $ 86b), leaving a $330b net change in these line items. But that is still enormous.

The most that the IMF ever lent out to cash strapped emerging economies in a year?

$30b, in the four quarters through September 1998 (i.e. the peak of the 97-98 crisis).

The most the IMF ever lend out over two years?

$40b, in the eight quarters through June 2003 (this covered crises in Argentina, Brazil, Uruguay and Turkey)

This is a very real crisis. The Fed’s balance tells a story of extraordinary stress. I never would have expected to see the Fed lend out these kinds of sums over such a short-period.”

September 29, 3:17 pm | [comment link]
8. IchabodKunkleberry wrote:

“It’s not based on any particular data point, ...We just wanted to choose a really large number.”
  Not based on a particular data point, meaning not based on
reality. And isn’t the thing about choosing a really large number
just what the CEOs of these failed enterprises did for their
compensation packages ? Sounds like we’re being fed more of
the same thinking that caused this mess in the first place.

September 29, 3:19 pm | [comment link]
9. Undergroundpewster wrote:

Put that quote on whatever new denomination of currency they have to print when the effectso f the “bailout” hit home (i.e. if the largest bill in circulation is the $100 bill, in the future it would be helpful to have a bill that could vary in it’s value, so “Choose a Very Large Number” could be printed in place of a set value).

September 29, 3:36 pm | [comment link]
10. Irenaeus wrote:

“We just wanted to choose a really large number”

Candid but cringe-worthy phrasing.

The spokeswoman probably meant that the administration chose a number large enough to convince market participants that the administration had both the will and the means to stem panic and restore liquidity to the financial system.

September 29, 5:55 pm | [comment link]
11. Jennie TCO wrote:

By way of comparison….The space shuttle Endeavor cost $2.1 billion.  State of SC 2008 budget plan is 7 billion.  Estimated damage from Hurricane Katrina was $81 Billion. The cost of the war in Iraq to date $558 billion - compare to $584 billion the cost of Vietnam War. The estimated Gross National Product of the US in 2007 was 13.8 trillion.  Sources furnished happily upon request.

September 29, 9:35 pm | [comment link]
12. rugbyplayingpriest wrote:

one more failure by those in authority. Alas the irresponsible children of the 60’s have proven catastrophic as adults. Having feathered their own nests at the cost of their children, driving mortgages to ludicrous and unrealistic levels. They have meddled in most every area of life in a damaging way trying to marry a naive love of marxist hippy philosophy with selfish capitalist values. Just look at what these rainbow guitar strapped loons have done to the church…..a slight rant i confess but tinged with truth no?

September 30, 4:37 am | [comment link]
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