Bailout costs to date for Financials - $900 billion

[J]

CNBC link

Tab for Government Rescues Rises to $900 Billion
By Reuters | 17 Sep 2008 | 03:44 AM ET

The U.S. Federal Reserve stepped in to rescue insurance giant American International Group from bankruptcy with an $85 billion loan on Tuesday, the latest in a series of bailouts and loans for the financial and housing sectors.

The action brings the total tab for government rescues and special loan facilities this year to more than $900 billion. Following are details of actions and amounts:

- $200 billion for Fannie Mae and Freddie Mac. The Treasury will inject up to $100 billion into each institution by purchasing preferred stock to shore up their capital as needed. The deal puts the two housing finance firms under government control.

- $300 billion for the Federal Housing Administration to refinance failing mortgage into new, reduced-principal loans with a federal guarantee, passed as part of a broad housing rescue bill.

- $4 billion in grants to local communities to help them buy and repair homes abandoned due to mortgage foreclosures.

- $85 billion loan for AIG, which would give the Federal government a 79.9 percent stake and avoid a bankruptcy filing for the embattled insurer. AIG management will be dismissed.

- At least $87 billion in repayments to JPMorgan Chase for providing financing to underpin trades with units of bankrupt investment bank Lehman Brothers. U.S. Treasury Secretary Henry Paulson said over the weekend he was adamant that public funds not be used to rescue the firm.

- $29 billion in financing for JPMorgan Chase's government-brokered buyout of Bear Stearns in March. The Fed agreed to take $30 billion in questionable Bear assets as collateral, making JPMorgan liable for the first $1 billion in losses, while agreeing to shoulder any further losses.

- At least $200 billion of currently outstanding loans to banks issued through the Fed's Term Auction Facility, which was recently expanded to allow for longer loans of 84 days alongside the previous 28-day credits.

The US has managed to spend twice as much on bailouts & loans as they do on their military budget. Keep in mind they're also flushing around $20 billion a month into Freddie & Fannie and this will continue until the former GSEs are put into run-off in 2010. That is just frightening.

[Surlethe]

Did we budget for this expenditure, are we borrowing it, or are we just printing it like drunken monkeys?

[Uraniun235]

Pretty sure we're borrowing, though I'm guessing an FDIC failure would spook Treasury into turning the presses up to '11'.

[J]

Did we budget for this expenditure, are we borrowing it, or are we just printing it like drunken monkeys?

A mix of the first two. Some of it came straight from the Federal Reserve Bank's vaults, some was borrowed from Treasury, and some of it was added to the budget after going through Congress. There hasn't been any printing, yet.

[Shroom Man 777]

Won't the US government run out of money after such copious amounts of spending? Waging wars, and now they're pulling up banks, and then there's the near future problem of Peak Oil and how they'll convert their infrastructure to reduce oil-dependence, Global Warming and climate change plus nasty weather...

It really doesn't look so good.

[Darth Wong]

Won't the US government run out of money after such copious amounts of spending? Waging wars, and now they're pulling up banks, and then there's the near future problem of Peak Oil and how they'll convert their infrastructure to reduce oil-dependence, Global Warming and climate change plus nasty weather...

It really doesn't look so good.

The US economy is huge: some $13 trillion per year last time I checked. The downside of that is that when the entire population goes on a reckless spending spree with borrowed money (as they've been doing for the last 20 years, especially the last 10) and the government attempts to prop up its popularity by encouraging this behaviour rather than trying to limit the inevitable catastrophe, the size of the economy only increases the rate at which the problem swings into huge figures.

I hate to say it but the last president who had the courage to tell Americans what was good for them was President George H.W. Bush, who raised taxes because he knew the country needed it. Of course, he was punished at the polls in 1992 for his honesty, and his son learned the lesson that you should never do what's right: just do what is short-term popular with your base.

[General Zod]

I hate to say it but the last president who had the courage to tell Americans what was good for them was President George H.W. Bush, who raised taxes because he knew the country needed it. Of course, he was punished at the polls in 1992 for his honesty, and his son learned the lesson that you should never do what's right: just do what is short-term popular with your base.

It probably didn't help his popularity in the polls any that one of his biggest talking points was "No new taxes.", which he then went to raise anyway. But at least Bush the Dumber picked up on the "Making impossible promises is okay if it helps you win an election." tactic.

[Ted C]

The US economy is huge: some $13 trillion per year last time I checked. The downside of that is that when the entire population goes on a reckless spending spree with borrowed money (as they've been doing for the last 20 years, especially the last 10) and the government attempts to prop up its popularity by encouraging this behaviour rather than trying to limit the inevitable catastrophe, the size of the economy only increases the rate at which the problem swings into huge figures.

I hate to say it but the last president who had the courage to tell Americans what was good for them was President George H.W. Bush, who raised taxes because he knew the country needed it. Of course, he was punished at the polls in 1992 for his honesty, and his son learned the lesson that you should never do what's right: just do what is short-term popular with your base.

Clinton also had a "deficit reduction package" that raised taxes, but he managed to get away with it. He was also fortunate enough to be President during the tech boom, and he avoided squandering the resulting revenue. Consequently, he actually ran a budget surplus for much of his Presidency.

[Illuminatus Primus]

I hate to say it but the last president who had the courage to tell Americans what was good for them was President George H.W. Bush, who raised taxes because he knew the country needed it. Of course, he was punished at the polls in 1992 for his honesty, and his son learned the lesson that you should never do what's right: just do what is short-term popular with your base.

Yeah, I completely agree. I always underscore this as the fundamental event in the formation of George W. Bush's political thought. He saw his father play the statesman at the cost of playing the politician, and decided he'd rather be a politician. His entire philosophy is based around his "legacy" and self-aggrandizement. He will have neither good statesmanship nor a good legacy as a result. His father always knew Reaganomics was bullshit: people forget he ran against Reagan in the primaries, and he is the one who coined "voodoo economics." He even refused to recant his opinion when he was Reagan's VPOTUS, and unsurprisingly, rolled it back.

[RIPP_n_WIPE]

So is the gov going to keep these new "assets" until we can turn a profit or just sell them back to the little people?

[The Kernel]

Won't the US government run out of money after such copious amounts of spending? Waging wars, and now they're pulling up banks, and then there's the near future problem of Peak Oil and how they'll convert their infrastructure to reduce oil-dependence, Global Warming and climate change plus nasty weather...

It really doesn't look so good.

The US economy is huge: some $13 trillion per year last time I checked. The downside of that is that when the entire population goes on a reckless spending spree with borrowed money (as they've been doing for the last 20 years, especially the last 10) and the government attempts to prop up its popularity by encouraging this behaviour rather than trying to limit the inevitable catastrophe, the size of the economy only increases the rate at which the problem swings into huge figures.

I hate to say it but the last president who had the courage to tell Americans what was good for them was President George H.W. Bush, who raised taxes because he knew the country needed it. Of course, he was punished at the polls in 1992 for his honesty, and his son learned the lesson that you should never do what's right: just do what is short-term popular with your base.

Keep in mind that, as you say, the US economy is huge. The national debt currently stands at ~$10 trillion with the public debt at roughly half that. That's a lot, but it also makes the government less leveraged than your average homeowner relative to income, and at a much more favorable interest rate too.

I DO believe that our debit ratio is too high, but people need to look beyond that raw number and realize that if an individual was carrying the debt that the government does proportional to income at the interest rate the government gets, everyone would say that they are fiscally sound. The issue with the national debt is that it is increasing at an alarming rate with no end in sight.

[Big Phil]

Bush Sr. may have told Americans the truth, but he still spent nearly $1 Billion more than he took in revenue during his presidency. Reagan only spent $1.4 billion more than he raised in taxes (over 8 years, not 4). Clinton overspent by $192 billion over 8 years, and ran surpluses his last three years, while reducing the deficit the first five.

Meanwhile, our fiscally conservative Commander in Chimp has already (in six years) surpassed Reagan by spending $1.5 Billion more than he's raised in taxes.



By the way, these are only "official" numbers. The actual deficit (when you factor in bailouts and the Iraq war) is staggering.

[Surlethe]

Is that CBO data inflation-adjusted?

[Darth Wong]

It's not surprising that Bush ran up some serious costs; he ran a war during his term too. It just cost far less than Shrubby's war. I never said the man was perfect, but he at least told Americans the truth: if you want to do things like fighting foreign wars, somebody has to pay the bills.

[Sikon]

Reagan only spent $1.4 billion more than he raised in taxes (over 8 years, not 4). Clinton overspent by $192 billion over 8 years, and ran surpluses his last three years, while reducing the deficit the first five.

The graph would be more meaningful if it showed who had control of congress too. If one looks at such data, usually the least deficit spending occurs when the party controlling congress is opposite that of the presidency, with a particular illustration of that being the Clinton years. In 1994, the Republicans took control of congress. While modern-day Republicans spend like crazy, for a time they were in conflict with the president (Clinton, president from 1992 to 2000), so they refused to pass many of his spending proposals and tried to act as fiscal conservatives to differentiate themselves from the Democrats.

The years of 1994 to 2000 had reduced deficits and then a surplus. Republicans frequently give all the credit to the Republican congress of the time. Democrats frequently give all the credit to Clinton. The truth is it was due to a combination of both with the conflict between them, plus the effects of non-government influences like the dot com boom.

Once the Republicans gained control of both Presidency and Congress later, they lost fiscal discipline, and spending has increased exponentially since, including after the democrats took control of congress since they aren't predisposed to slow it.

[CmdrWilkens]

It's not surprising that Bush ran up some serious costs; he ran a war during his term too. It just cost far less than Shrubby's war. I never said the man was perfect, but he at least told Americans the truth: if you want to do things like fighting foreign wars, somebody has to pay the bills.

He also ran his last two budgets under the most recent actual recession that the US expereinced so at a time of declining revenue and increased expenditure due to GW1 its neat that he managed to keep the numbers even close.

[Big Phil]

Is that CBO data inflation-adjusted?

I don't think so

The graph would be more meaningful if it showed who had control of congress too.

Democrats controlled Congress under Reagan, Democrats the last two years under Shrub Jr. There was little to no fiscal control those years, so your argument kind of flies out the window.

It's not surprising that Bush ran up some serious costs; he ran a war during his term too. It just cost far less than Shrubby's war. I never said the man was perfect, but he at least told Americans the truth: if you want to do things like fighting foreign wars, somebody has to pay the bills.

He also ran his last two budgets under the most recent actual recession that the US expereinced so at a time of declining revenue and increased expenditure due to GW1 its neat that he managed to keep the numbers even close.

Kennedy, Johnson, and Nixon were also paying for wars, and they managed to keep the deficit under wraps. Maybe that's because, unlike Reagan, they weren't complete morons and understood that supply-side economics was exactly as Bush described it: Voodoo Economics. Too bad Bush didn't practice what he had preached in 1980...

[Stormbringer]

Clinton also had a "deficit reduction package" that raised taxes, but he managed to get away with it. He was also fortunate enough to be President during the tech boom, and he avoided squandering the resulting revenue. Consequently, he actually ran a budget surplus for much of his Presidency.

Not exactly much of his presidency. And a goodly chunk of that "surplus" was either projected for post-Clinton years or achieved by "deferring" the money that should have gone into some of the entitlement programs.

Kennedy, Johnson, and Nixon were also paying for wars, and they managed to keep the deficit under wraps. Maybe that's because, unlike Reagan, they weren't complete morons and understood that supply-side economics was exactly as Bush described it: Voodoo Economics. Too bad Bush didn't practice what he had preached in 1980...

And yet we wound up with stagflation all the same. Economics isn't as simple as keeping the budget balanced.

[Big Phil]

Kennedy, Johnson, and Nixon were also paying for wars, and they managed to keep the deficit under wraps. Maybe that's because, unlike Reagan, they weren't complete morons and understood that supply-side economics was exactly as Bush described it: Voodoo Economics. Too bad Bush didn't practice what he had preached in 1980...

And yet we wound up with stagflation all the same. Economics isn't as simple as keeping the budget balanced.

Of course not, but you're not seriously going to start arguing that $9 Trillion in debt is good for the economy, are you?

[aerius]

I'm reminded of this particular poster:

[ray245]

Sigh...If a global depression takes place...I doubt that I can even afford to go into university...

That is one of my main worry...

[Stormbringer]

Kennedy, Johnson, and Nixon were also paying for wars, and they managed to keep the deficit under wraps. Maybe that's because, unlike Reagan, they weren't complete morons and understood that supply-side economics was exactly as Bush described it: Voodoo Economics. Too bad Bush didn't practice what he had preached in 1980...

And yet we wound up with stagflation all the same. Economics isn't as simple as keeping the budget balanced.

Of course not, but you're not seriously going to start arguing that $9 Trillion in debt is good for the economy, are you?

Of course not and where the hell do you get off implying I did?

My point was that those presidents you named did create a nasty bout of stagflation despite keeping deficits "under wraps."

[Phantasee]

Sigh...If a global depression takes place...I doubt that I can even afford to go into university...

That is one of my main worry...

I'm sorry, but I think one of your main worries should be your inability to write a comprehensible paragraph affecting your chances for university, more than a global depression.




On Topic: $900 billion dollars? Like, $900 000 000 000? Holy fucking shit. What is the effect this is going to have on the US dollar's value? I'm curious how this kind of spending has on the currency's value.

[Sikon]

The graph would be more meaningful if it showed who had control of congress too.

Democrats controlled Congress under Reagan, Democrats the last two years under Shrub Jr. There was little to no fiscal control those years, so your argument kind of flies out the window.

You skip over the point that graphing and discussing budget deficit or surpluses as if attributable to the presidency alone is less accurate than considering who was in power in both the legislative and executive branches (plus non-governmental influences). Who has majority control
of Congress is at least as important as the Presidency, since they are the ones who vote on bills, although the President can veto anything not passed by a great enough majority to be veto-proof and has a significant indirect influence.

Meanwhile, your description of whatever you think is my argument is too incoherent or non-existent to exactly define. You speak of Democrats controlling Congress during the last 2 years of the Bush presidency as if that wasn't mentioned in my response. But, if you had read it fully, you would have noticed such was already mentioned:

Once the Republicans gained control of both Presidency and Congress later, they lost fiscal discipline, and spending has increased exponentially since, including after the Democrats took control of Congress since they aren't predisposed to slow it.

My points are illustrated in this graph:



Of course, even this graph doesn't show everything.

The decisions of those running the government aren't the only factor influencing whether there is a surplus or a deficit since the health of the private sector economy has other influences as well, in turn influencing the amount of tax revenues.

However, it can be observed from the above graph how tax revenue has gone up greatly over the years with just some limited dips, even if adjusted for both inflation and population. As illustrated in the top graph, it even stayed almost the same and then went up after the Reagan-era tax cuts reducing the top rate from 70% to 50% and then 28/32%; it started declining temporarily in the 2000-2003 timeframe after the dot com crash but then went up again. There wouldn't be deficits if spending wasn't increased so fast.

For example, as shown in the graph, in the year of the record 2004 deficit, even with the poor state of the economy, tax revenues were still greater than during the approximately balanced budget in 1997. But spending had enormously increased between 1997 and 2004, even relative to population and even after adjusting for inflation. As a result, such caused a huge deficit instead of an approximately balanced budget.

Even after excluding military expenses like all Department of Defense funding, the Iraq War, and veteran's benefits, the civilian component of federal spending between 2002 and 2008 went up from $1970 to $2330 billion a year in inflation-adjusted 2008-dollars.* That's an increase of $1200 per person in annual spending, cumulatively several thousand dollars or more extra spent per man, woman, and child in the country over the 2002-2008 period. I don't know of almost anybody who can really say they noticed several thousand dollars of extra benefit from 2008 levels of spending compared to if spending had stayed at about 2002 levels.

Supplied with almost any amount of funds, the average congresscritter will ordinarily spend them until they are all used and then further until a substantial deficit appears; I bet if one doubled tax collections, within a few years there would be spending into a deficit again. After all, that occurred when federal tax collections between 1978 and 2008 increased by 530% in original dollar figures, increased 87% after inflation, and still increased by 39% after adjustment for both inflation and population. In the whole 30-year period of the graphs, the only time without deficit spending was the 1998-2001 period, occurring after spending growth had stalled with conflict between the parties that had gone so far as the "government shutdown" of 1995 disagreement between Clinton and the Republican congress.

Data for the graph comes from here, here, here, and here. In cases where shown, population-adjusted figures refer to past year amounts considering factors like how the 1978 federal budget of $399.561 billion spent when the population was 223 million was proportionally more or less like spending $2115 billion in today's dollars when the population is 304 million, including the fact that a 1978-dollar was worth 3.38 times as much as one of today's dollars.

-----------------

* Such refers to the federal budget. In 2008, total expenditures of all kinds including state and local governments were about $5.28 trillion.

[Sikon]

The US has managed to spend twice as much on bailouts & loans as they do on their military budget.

Although it is a large figure undesirable in many ways, that's not entirely a proper comparison. For example, money spent on the DoD budget is fully that as a net expense, whereas the AIG $85 billion loan is presumably supposed to get paid back as a loan, and the net expense, if any, of such per year would be a small fraction of the total $85 billion figure. On the other hand, for example, the $4 billion in grants definitely won't get paid back. Of course, these are large expenses which will cause the problem of further deficit spending, but thinking of them as double DoD budget like $900 billion net expense in a year wouldn't give quite the right picture.