Tuesday, January 27, 2009

Bailouts and the future



The federal government -- that is, you and I and every other taxpayer -- has taken ownership of giant home mortgagors Fannie and Freddie, which are by now basket cases. We've also put hundreds of millions into Wall Street banks, which are still flowing red ink and seem everyday to be in worse shape. We've bailed out the giant insurer AIG, which is failing. We've given GM and Chrysler the first installments of what are likely to turn into big bailouts. It's hard to find anyone who will place a big bet on the future of these two.

It gets worse. While Washington debates TARP II, the Federal Reserve Board continues to buy or guarantee or provide loans for a vast and growing pile of questionable financial and corporate assets, much of which are likely to be worth far less than the Fed has paid or guaranteed or accepted as collateral. We're talking big money here -- so far over $2.4 trillion. (The entire TARP -- parts I and II -- in combination with the proposed stimulus package come to just over $1.5 trillion.)

Taxpayers are on the hook for this Fed bailout money, too, of course. We have to pay the interest on the ever-growing debt used to make these payments or guarantees and loans. Yet while TARP II and the upcoming stimulus package are receiving a great deal of attention, this much larger public commitment by the Fed is not. That's partly because the media doesn't much of understand it, but also because the Fed is doing it in secret, using provisions of its charter never before utilized, and avoiding discussion before the full Board of Governors for fear such meetings would be subject to the Freedom of Information Act.

Put it all together and at this rate, the government -- that is, taxpayers -- will own much of the housing, auto, and financial sectors of the economy, those sectors that are failing fastest.

3 Comments:

Anonymous Anonymous said...

Hi Doug,

I'd say there is a very good article out today by Nick Turse, regarding the string of murder/suicides, bank robberies, arsons, etc., performed by folks at wit's end, losing their house through eviction or foreclosure, job loss,, company failures, and on and on. Very sad, to be honest.

But what came to my mind too, was what will happen when Americans wake the hell up, see the looting for what it really is (criminal conspiracy to defraud the American public), and direct the anger and frustration AWAY from blaming themselves, and at the segments of society CAUSING their pain.

Brings a smile to this ol' guy's mug.

3:22 PM  
Anonymous Anonymous said...

great post

9:51 AM  
Anonymous Simcha said...

Doug if you want to do a blog roll trade let me know simcha at reversemortgageadviser dot com

9:54 AM  

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