U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit

Posted by Kendall Harmon

The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

Read it all.

Update:Barry Ritholtz notes that "Jim Bianco of Bianco Research crunched the inflation adjusted numbers. The bailout has cost more than all of these big budget government expenditures – combined":

• Marshall Plan: Cost: $12.7 billion, Inflation Adjusted Cost: $115.3 billion
• Louisiana Purchase: Cost: $15 million, Inflation Adjusted Cost: $217 billion
• Race to the Moon: Cost: $36.4 billion, Inflation Adjusted Cost: $237 billion
• S&L Crisis: Cost: $153 billion, Inflation Adjusted Cost: $256 billion
• Korean War: Cost: $54 billion, Inflation Adjusted Cost: $454 billion
• The New Deal: Cost: $32 billion (Est), Inflation Adjusted Cost: $500 billion (Est)
• Invasion of Iraq: Cost: $551b, Inflation Adjusted Cost: $597 billion
• Vietnam War: Cost: $111 billion, Inflation Adjusted Cost: $698 billion
• NASA: Cost: $416.7 billion, Inflation Adjusted Cost: $851.2 billion

TOTAL: $3.92 trillion

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data courtesy of Bianco Research

Read all he has to say as well.



Filed under: * Economics, Politics • Economy • The September 2008 Proposed Henry Paulson 700 Billion Bailout Package

4 Comments
Posted November 25, 2008 at 4:18 pm [Printer Friendly] [Print w/ comments]



1. Sick & Tired of Nuance wrote:

$7.7 Trillion is enough to pay all 306 million Americans $25,000 each.

It would be cheaper to just pay all the mortgages in the US off completely than to do this lunacy called a bail out!

November 25, 9:00 pm | [comment link]
2. Dilbertnomore wrote:

Interesting that the preference seems to be to spend trillions of dollars we don’t have to throw at problems that may or may not be real threats rather than guarantee by a federal insurance plan all outstanding mortgage loans (less than 10% may go bad, but the vast majority will be pay off just fine) to restore confidence in the lending institutions and cancel collection of capital gains taxes for two years (which will very effectively stimulate the markets and the general economy).

I submit this approach would be successful for a small fraction of the $7.7 Trillion we are throwing at this GOVERNMENT CREATED PROBLEM.

Unfortunately, federal mortgage guarantees and capital gains tax relief just don’t provide the political snap and wow the Congress and Administration (both coming and going) want and need. A nasty, festering pox on both their houses!

#1, BTW, looked at another way, Congress and the Administration (a pox on both of them) is in the process of sticking each and every American man, woman and child with a $25,160 bill. Each couple (married, shacked-up or otherwise politically-correctly configured) owes $50,320. Family of three owes $75,480. Family of four owes $100,640. Family of five owes $125,800.

How many families would stand for this abortion of financial malpractice if they were given the means to understand the consequences of the act?

November 26, 4:02 pm | [comment link]
3. RevK wrote:

I paid off my mortgage and now I get to pay off a stranger’s as well.  Perhaps I should have purchased the big-screen TVs and expensive cars that the irresponsible did; then I might be getting bailed out, too.  And let’s not forget our friends, the lenders, Fannie, Freddie and Countrywide.  Without them (and their huge political donations) we wouldn’t be in this mess.

And Dilbert, while your last paragraph’s math is good, it overlooks the problem that barely half of American household even pay taxes, raising the burden for those who do even higher.

Sure hope this works….

November 26, 10:06 pm | [comment link]
4. Dilbertnomore wrote:

RevK, I had thought about the tax freeloaders in the bottom half of the wage scale, but I didn’t want to get dinged by the elves for straying off topic.

November 26, 10:11 pm | [comment link]
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