Yet another bailout - Taxpayer tally

News Type: Opinion — Seeded on Thu Sep 18, 2008 12:03 PM EDT

Article Source: CNN

business, bailout, federal-reserve, fed, aig, auto-industry, bear-stearns, taxpayer, freddie, fannie

The Federal Reserve has backstopped the purchase of Bear Stearns to the tune of $29 billion. It will loan $85 billion to insurer AIG. It's letting banks borrow up to $150 billion using risky mortgage-backed securities as collateral. And it's letting investment banks, which it doesn't regulate, get short-term loans using the central bank's discount window.

The Treasury, meanwhile, has pledged to backstop Fannie and Freddie up to $200 billion. Lawmakers passed legislation allowing the Federal Housing Administration to insure up to $300 billion in loans for troubled borrowers. They're likely to loan $25 billion to the auto industry.

And the government might not be finished. ...

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1.6

{"commentId":2987265,"authorDomain":"thedoctori"}

thedoctori

What's the cost?

If you add up how much the Treasury and Fed have pledged or made available for loans so far, it's close to $800 billion.

But the author argues it's not simple:

Indeed, he said, "None of us knows yet if there'll be any cost to the taxpayer at all."

Here's why: The bailouts are, in one form or another, loans or investments. How much they end up costing (or making) depends on a number of factors including how the economy holds up and when the real estate market recovers.

"A lot depends on whether or not we get in a severe recession and how quickly we turn things around in housing," Gramley said.

In exchange for their stepping in, the Fed and Treasury are getting assets as collateral (in some cases, income-producing assets and saleable assets) as well as majority ownership stakes in AIG, Fannie and Freddie. They've also claimed veto power for corporate decisions and a No. 1 spot among stakeholders who get paid first.

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1 vote

#1 - Thu Sep 18, 2008 12:06 PM EDT

{"commentId":2989153,"authorDomain":"cyan412000"}

cyan412000

not the governments job to be taking stock or assets in private companies...very very dangerous

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1 vote

#1.1 - Thu Sep 18, 2008 1:59 PM EDT

{"commentId":2989765,"authorDomain":"thedoctori"}

thedoctori

Yes. I agree, most of the time. We are in deep sh*t right now, though, and our economy could not handle the collapse of the banking or home mortgage industries. 50% of Americans' net worth is in their home. Many businesses work on borrowing for capital improvements, acquisitions, and even operational costs.

In a sense, government got us into this mess partially because of lax regulation. Stupid lenders and borrowers didn't help either.

Either the Fed steps in now, or we're going to see a collapse of the banking system, partially because of the world interconnectedness in derivatives, bonds, short-term lending between institutions, etc.

At least the Fed is getting some hard assets for its lending. And when the housing market improves, we may even come out ahead.

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#1.2 - Thu Sep 18, 2008 2:34 PM EDT

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	Uncle Sam taps piggy bank, borrows to aid market	Associated Press	Wed Sep 17	2
	Fed plows $30 billion in money markets overseas	Associated Press	Thu Sep 18	0

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Yet another bailout - Taxpayer tally

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