U.S. Taxpayers Risk $9.7 Trillion on Bailouts as Senate Votes

I just pulled this off of Bloomburg...


By Mark Pittman and Bob Ivry

Feb. 9 (Bloomberg) -- The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps. The Senate is to vote early this week on a stimulus package totaling at least $780 billion that President Barack Obama says is needed to avert a deeper recession. That measure would need to be reconciled with an $819 billion plan the House approved last month.

Only the stimulus package to be approved this week, the $700 billion Troubled Asset Relief Program passed four months ago and $168 billion in tax cuts and rebates approved in 2008 have been voted on by lawmakers. The remaining $8 trillion in commitments are lending programs and guarantees, almost all under the authority of the Fed and the FDIC. The recipients’ names have not been disclosed.

“We’ve seen money go out the back door of this government unlike any time in the history of our country,” Senator Byron Dorgan, a North Dakota Democrat, said on the Senate floor Feb. 3. “Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?”

Financial Rescue

The pledges, amounting to almost two-thirds of the value of everything produced in the U.S. last year, are intended to rescue the financial system after the credit markets seized up about 18 months ago. The promises are composed of about $1 trillion in stimulus packages, around $3 trillion in lending and spending and $5.7 trillion in agreements to provide aid.

Federal Reserve lending to banks peaked at a record $2.3 trillion in December, dropping to $1.83 trillion by last week. The Fed balance sheet is still more than double the $880 billion it was in the week before Sept. 17 when it agreed to accept lower-quality collateral.

The worst financial crisis in two generations has erased $14.5 trillion, or 33 percent, of the value of the world’s companies since Sept. 15; brought down Bear Stearns Cos. and Lehman Brothers Holdings Inc.; and led to the takeover of Merrill Lynch & Co. by Bank of America Corp.

The $9.7 trillion in pledges would be enough to send a $1,430 check to every man, woman and child alive in the world. It’s 13 times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office data, and is almost enough to pay off every home mortgage loan in the U.S., calculated at $10.5 trillion by the Federal Reserve.

‘All the Stops’

“The Fed, Treasury and FDIC are pulling out all the stops to stop any widespread systemic damage to the economy,” said Dana Johnson, chief economist for Comerica Inc. in Dallas and a former senior economist at the central bank. “The federal government is on the hook for an awful lot of money but I think it’s needed to help the financial system recover.”

Bloomberg News tabulated data from the Fed, Treasury and FDIC and interviewed regulators, economists and academic researchers to gauge the full extent of the government’s rescue effort.

Commitments may expand again soon. Treasury Secretary Timothy Geithner postponed an announcement scheduled for today that was to focus on new guarantees for illiquid assets to insure against losses without taking them off banks’ balance sheets. The Treasury said it would delay the announcement until after the Senate votes on the stimulus package.

Program Delay

The government is already backing $301 billion of Citigroup Inc. securities and another $118 billion from Bank of America. The government hasn’t yet paid out on any of the guarantees.

The Fed said Friday that it is delaying the start a $200 billion program called the Term Asset-Backed Securities Loan Facility, or TALF, to revive the market for securities based on consumer loans such as credit-card, auto and student borrowings.

Most of the spending programs are run out of the Federal Reserve Bank of New York, where Geithner served as president. He was sworn in as Treasury secretary on Jan. 26.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and then Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. The Federal Reserve so far is refusing to disclose loan recipients or reveal the collateral they are taking in return. Collateral is an asset pledged by a borrower in the event a loan payment isn’t made.

Fed Sued

Bloomberg requested details of Fed lending under the Freedom of Information Act and filed a federal lawsuit against the central bank Nov. 7 seeking to force disclosure of borrower banks and their collateral. Arguments in the suit may be heard as soon as this month, according to the court docket. Bloomberg asked the Treasury in an FOIA request Jan. 28 for a detailed list of the securities it planned to guarantee for Citigroup and Bank of America. Bloomberg hasn’t received a response to the request.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors of the Federal Reserve System, 08-CV-9595, U.S. District Court, Southern District of New York (Manhattan)

# trying to stimulate the economy lets pay off everyones C.C. Debt and mortgage debt. everyone will have tons of money to spend again to flush this credit freeze right out.

I saw this on the news this morning. When Iw as watching it, the first words out of my mouth were "we're F%&^*D" We will soon be in the hands of China. And the last thing that Americans will accept is China rule.
War would soon be a problem solver than to hand everything over to them. Either way, we are screwed. 9.7 trillion. Think about that number for just a moment.

while everyone is focused on the Stimuless bill the BIG THING the investor class is focusing on is what Geithner and the Asset price protectors (for the investment class) and creditors who made predatory and reckless loans will decide to do tommorrow.

www.nytimes.com...

article says that private money may play a role in the financial system plan so long as any losses are picked up by the tax payer.

You must see what is going on........The CREDITORS have these debts with FICTICIOUS values on there books......they DON'T want these DEBTS written down (which would help the debtor/taxpayer's) so instead they need to off load these to the gov't (who will overpay on them) or private investors (who will over pay only if the losses ) are picked up by the taxpayer. This is a transfer of wealth from poor/ middle class to the wealthy class when the poor /middle class doesn't have much wealth left. The investor /wealth class is using there political influence (campaign contributions/ lobbyists, fox in hen house) to shape and mold opinion and action in washington to support Creditors being made whole on RECKLESS LENDING when the debt on the books is being desperately attempted to be held at MARK TO FANTASY value.....the only way they can do that is have the gov't buy the assets at a price the creditors want.....and then saddle the gov't or taxpayers with the subsequent losses.......

What about the people who are fiscally responsible and have paid off their house and don't have huge credit card bills? What "reward" from the government do they get? Nothing? So basically the government is encouraging irresponsibility. Great.

What the HELL?!

All these entities receiving trillions in bailouts yet the people that owe these entities via credit card payment, student loan, car payment, or whatever, will have to pay the same bills to them every month?

Then we pay the taxes or have our spending power eroded to fund these bailouts.

Is the government purposefully trying to push the American people over the edge? Or maybe the government thinks we are too stupid to notice?

The United States Government and almost all of it's politicians are gigantic leeches sucking the people of this country dry.

And guess what, it's only going to get worse.

Let's just keep piling on to that debt!

We'll fix the problem for sure!