Tally of Federal Rescues
In the Sunday NYT print edition, there is an excellent visual depiction of costs all the Federal bailouts relative to ordinary fiscal expenditures (Iraq & Afghanistan Wars, Medicaid, stimulus package, social security, etc.)
It is extraordinary to see how our on the fly, poorly thought out cures are so much more expensive the debated, modified, well known "ordinary" expenditures of the government.
The NYT buried this graphic, which you could never have found online unless you first saw it in the dead tree edition and then went a-huntin for it.
>
A Tally of Federal Rescues:
click for ginormous version
graphic courtesy of the NYT
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An ounce of prevention is truly worth a pound cure
Sunday, September 28, 2008 | 09:28 AM | Permalink
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Bloomberg.com and MSM reporting a deal has been done. No doubt there will be something in this for everyone... mortgage workouts, recapitalization and equity stakes for the taxpayer.
Hopefully the sillier insurance program ideas of the younger House Republicans are out. More of the concept that brought us AIG, Ambac and MBIA...? If you look at Cantor you can see right through his skull, nothing between the ears.
Another victory for cynicism over rational thinking. Reflation trades are on, keep an eye on the 10-year.
Posted by: leftback | Sep 28, 2008 9:39:56 AM
Although this graphic is selective (for instance, it doesn't show the "defense" budget, which would tower right up there with SocSec), one can quickly get the flavor. Almost every single item constitutes what Jane Jacobs used to call "transactions of decline" -- robbing Peter to pay Paul; buying dud, looted assets; paying interest on past years' waste, malfeasance and theft.
If the actual productive expenditures -- defending the continental borders, managing trade and foreign relations, facilitating health, education and transportation -- could be extracted and depicted, they would look like a flattened postage stamp among these Brobdingnagian towers of folly and avarice.
DEATH TO THE DOLLAR!
Posted by: Jim Haygood | Sep 28, 2008 9:40:04 AM
Can someone post summary details of the bailout as soon as they see something official?
The renegotiation of mortgages sounds like putting a floor in pets.com when it fell from $72 to $50 in 2000.
Posted by: brian | Sep 28, 2008 9:52:55 AM
Oh great. The best idea Congress can come up with is called a "bailout plan". Am I getting too cynical, or is there no hope of a private sector proposal? Where are the private sector economists, etc. (academics, ex. Wall St. - no conflicts of interest)? Buddy can you spare a good Hedge Fund manager? Chris Whalen has a good plan, but I guess what Hank P. wants, her gets. The Chinese think we're idiots, and call this pkg. "fast food". How humiliating it is right now to be an American. It took us 15 yrs. to get into this mess - brought to you mostly by the Treas./Fed/SEC, the very gov't agencies that are apparently given authority to "fix" it (Congress too!) - and now we have to put our financial Humpty Dumpty back together again in a couple of weeks. Oh, and by the way, the taxpayer (US citizen) eats it. The best gov't money can by. Sheesh!
Posted by: concerned citizen | Sep 28, 2008 9:54:53 AM
So we will rally for a few days, maybe even see a bit of a squeeze, and then the next shoe is going to begin to drop, just across the state line:
http://www.nakedcapitalism.com/2008/09/hedge-funds-face-record-redemptions.html
How big is the "low talent" end of the hedge fund industry relative to LTCM? We are likely to find out quite soon. I've met some of these guys and a lot of them are not rocket scientists.
Posted by: leftback | Sep 28, 2008 10:01:04 AM
As things get progressively worse in our credit/real estate markets, check out the fight that goes on to save the Downpayment Assistance Programs
http://www.dpagroundswell.org/
For the uninitiated, Downpayment Assistance Program (DPA) is essentially the following:
1. Buyer sees house he likes, but doesn't have the downpayment.
2. Seller, through her agent, says, "No problem, we'll increase the sales price by 3%, and Seller will 'make the downpayment for you' as part of this DPA program.
3. At closing, Seller makes a "gift contribution" to a DPA outfit, like Nehemiah Corporation or Ameridream. Simultaneously, the DPA outfit makes a "nonprofit" downpayment gift to the Borrower--less a $400 processing fee.
4. Borrower gets in the house without having to come up with the incredibly burdensome 3% downpayment. In fact, the borrower may even leave the closing table with a few hundred dollars in his pocket---which is great for that post-closing trip to Home Depot!
If all this seems like a violation of the RESPA prohibition against kickbacks between Seller and Borrower---think again! Perfectly legal and sanctioned by FHA. Essentially this is FHA sponsored subprime.
And in the end...has anyone learned a thing? Does the fact that the delinquency rates of these loans rival--if not surpass--- the subprime trash matter?
Hell no. The fight goes on to "Save DPA!" And the good fight is carried on with a straight face.
The level of denial from the macro perspective (ie $700 billion to purchase that which has no credible purchase price).... to the micro perspective (Save DPA!) is utterly astounding.
Posted by: Dan Duncan | Sep 28, 2008 10:09:15 AM
Well, it is being reported on the Dow Jones newswire this morning that the Chinese Premier, Wen Jiabao, is concerned about the safety of Chinese investments in U.S. markets....it will probably get widespread play this afternoon.
I would just mull this over. If the 800 pound gorilla that determines that bailouts and bank rescues and so forth get done "before the Asian markets open on Monday" is voicing his displeasure at investing in the US, it won't be long until there is less US investment...
just something to mull over.
going climbing, back late tonight.
Posted by: Bruce in Tennessee | Sep 28, 2008 10:15:56 AM
How many years old are his national debt figures? The national debt is now over 9 trillion and interest paid last year about 430 billion.
Posted by: Ron | Sep 28, 2008 10:18:42 AM
These charts are, of course, very misleading:
* First off, Social Security is SELF-FINANCING, and is clearly NOT an expenditure from general revenues. This is partially true of Medicare as well. The former does not even belong in the group, and the latter is dubious.
* Second, the stated $407 Billion federal deficit is laughable. Add in the couple of hundred billion of off-budget spending on the Iraq and Afghanistan wars, add in the several hundred billion being used to mask the deficit from the trust funds, and the annual federal deficit is around $1 Trillion.
* Third, as was mentioned, the Military Industrial Complex, which would tower over all, was selectively omitted.
~~~
leftback,
The goofy insurance program from the House Republicans is in there, but it is voluntary, not unlike the pilot program for the ridiculous HSA medical accounts was added to healthcare legislation some years back. They are harmless gibberish, but it settles the natives.
.
Posted by: VJ | Sep 28, 2008 10:19:09 AM
Rudy G. is said to be on the hunt for customers. He is claiming that, for a fee, he can get a pile of the money being appropriated for this plan.
I didn't look at your charts, but the modern Republican Business Model revolves around free money from the government to Friends Of Republicans. It's not real money because it's borrowed money and someone else has to pay it back, probably long after the recipient dies from old age.
Adding liquidity to the working credit markets appears to be needed badly. This plan might be thought out well enough to minimize the theft aspects.
Or we can all embrace the Republican plan requiring 'insurance'. To me, this sounds like
1) Pay maybe 10% of the insured amount as a premium.
2) Wait a few months
3) Cry 'Default' or 'My insured investment is now worth nothing'
4) Make a claim on the insurance amount. Get back the 10% paid out earlier plus the balance of the bad asset.
5) On the other hand, the 'insurance' plan would jimmy up the value of the dead money because Uncle Stupid will be offering 90% on the dollar of investments that you get to value yourself. Thus level 3 assets will magically rise in value and the Republican Business Model will claim victory.
Posted by: dead hobo | Sep 28, 2008 10:31:51 AM
$7 billion for Children's Health Care. That's really sad! really sad!
Posted by: tom sj | Sep 28, 2008 10:42:18 AM
What was the total contribution to GDP from the financial services industry?
Posted by: ed | Sep 28, 2008 10:42:56 AM
Serious questions here: How valid do you consider the TED spread argument as justification for the bailout, i.e., to prevent financial panic and a complete credit meltdown? Isn't the TED spread argument anecdotal (meaning companies can still get credit but have to pay higher yields - see CAT)? What if Treasury rates had been higher (if the Fed had not eased so precipitously in the last few months), would the TED spread be so high?
Posted by: CNBC Sucks | Sep 28, 2008 10:43:49 AM
As I described above, the 'insurance' plan is not much different from the original Paulson plan. It has the benefit of no accountability, or maybe only the appearance of accountability. Level 3 assets will rise in value significantly upon announcement and will continue to rise as long as Uncle Stupid is offering the 'insurance'. No facility to sell the assets or possibly make a profit will even be considered until after the certain default.
Basically, Uncle Stupid would be offering a CDS to owners of wretched quality assets, working as a deep pockets counterparty.
The real question is this 'nature or nurture'? Are high level Republicans morally bankrupt down to their bones or are they just really dumb and mean well?
Posted by: dead hobo | Sep 28, 2008 10:47:14 AM
I'm not humiliated or embarrassed to be an American, just because some dumbasses effed up.
Posted by: Jay | Sep 28, 2008 10:53:45 AM
Jim Haygood is correct in his comment above about Defense spending. According to http://www.federalbudget.com/ defense spending is around $640 billion and rivals Social Security.
Cutting defense spending by about 20% could immediately help reduce the deficit.
Posted by: One Salient Oversight | Sep 28, 2008 11:08:47 AM
Defense isn't going to be cut by 20%. It's not even going to be cut by 5%.
Posted by: Jay | Sep 28, 2008 11:14:19 AM
The real "Lender of Last Resort" is the Printing Press in this crisis.
Posted by: mw | Sep 28, 2008 11:18:12 AM
I just woke from a coma and my friends and family have been filling me in. Let me see if I've got this straight.
1) Wall Street is bankrupt.
2) The Rebooblican party nominated a total... and I mean TOTAL dipsh-t to be VP.
3) We are now a banana republic with nukes.
Okay, I know, I'm still in a coma and I'm not even supposed to be able to dream this sh-t.
Then why is it happening?
Posted by: TG Randini | Sep 28, 2008 11:25:46 AM
A national remedy should only be used in cases of national calamity, when forces outside control devastate, as occured with Hurrican Katrina.
A national remedy should not be available for gross ineptitude and stupidity.
Posted by: Winston Munn | Sep 28, 2008 11:27:32 AM
Andy Kessler joins Warren Buffett and Bill Gross in saying the $700 billion "bailout" will make money for taxpayers. He estimates the mother of all carry trades will generate between $1 trillion and $2.2 trillion for taxpayers if executed correctly.
It's truly unfortunate how Paulson has presented these various interventions to Congress and the public. I totally understand the ideological arguments against government intervention in markets, but objections based on the costs/losses to taxpayers may ultimately prove to be ill founded.
http://online.wsj.com/article/SB122230704116773989.html
Posted by: Groty | Sep 28, 2008 11:29:11 AM
military budget - have you paid attention to the news around the world? The axis is forming against us.
The whole nytimes article seems to be subjective and misleading. Earmarks are understated.
If the creation of money is understood the information that would be reported would be different.
Global money will pop all money needs to deflate. It might not happen this time hut it will in our lifetime. The while system is broke global system so the Chinese are either folish or ignorant to mock us. Last time I checked they have a non sustaining economy that relies heavly on exports and ties to the us dollar. They can threat us all they want that would sting, however our people could not stan for us to threaten then because that would be mean. This bailout may or may not work short term. It will faillpng term as the only solution is deflation of money supply. Those in the USA can only hope when the dust settles the USA does not lose a larger percentage of money supply.
Posted by: n999 | Sep 28, 2008 11:34:00 AM
Posted by: TG Randini | Sep 28, 2008 11:25:46 AM
TG,
though I think you know, We're being Looted.
further, the American Middle Class, you know, the ones that had the Gun pointed at their Head, and heard that hoary tritism of Robbers everywhere: "Your Money, or Your Life!", is/was(?) the last bulwark of Liberty on the face of the Globe.
http://www.foreignaffairs.org/20080901faessay87504/henry-m-paulson-jr/a-strategic-economic-engagement.html
~
http://www.foreignaffairs.org/20080701faessay87406/robert-a-pastor/the-future-of-north-america.html
who has bets that the U$D makes it to 2011?
Posted by: Mark E Hoffer | Sep 28, 2008 11:49:23 AM
"Andy Kessler joins Warren Buffett and Bill Gross in saying the $700 billion "bailout" will make money for taxpayers. He estimates the mother of all carry trades will generate between $1 trillion and $2.2 trillion for taxpayers if executed correctly."
An IMF study of 124 bailouts (WP08224 -- look it up) found "LARGE" costs for every single bailout, consisting of large fiscal costs, large output losses (i.e., recession), or both. Not one single bailout EVER made money for the public, or ever will.
Kessler's claim is a ludicrous, bald-faced lie. And where's it published? In the National Enquirer of financial journalism, the Whore Street Journal.
What a risible load of hogwash. Don't be a sucker.
Posted by: Jim Haygood | Sep 28, 2008 11:52:20 AM
Quote Jim Haygood: "What a risible load of hogwash. Don't be a sucker."
Oh, gee, is that maybe why there aren't hordes of private firms lined up to buy these "golden-valued" assets before that greedy Uncle Sam "gets all the good stuff"?
Posted by: Winston Munn | Sep 28, 2008 12:02:36 PM
