Wall Street Bailout Exceeds Cost of All US Wars Combined

[GliderGuider]

Wall Street Bailout Exceeds Cost of All US Wars Combined

And you can throw in the New Deal, Marshall Plan and Moon Shots as well



Casey Research, of Vermont, has analyzed the costs of the government bailouts of the housing crisis, the credit crisis and others and has concluded that the total is $8.5 trillion, which is more than the cost of all US wars, the Louisiana Purchase, the New Deal, the Marshall Plan and the NASA Space Program combined.

According to CRS, the Congressional Research Service, all major US wars (including such events as the American Revolution, the War of 1812, the Civil War, the Spanish American War, World War I, World War II, Korea, Vietnam, Iraq and Afghanistan, the invasion of Panama, the Kosovo War and numerous other small conflicts), cost a total of $7.5 trillion in inflation-adjusted 2008 dollars.

[Double T]

1. America can't afford wall street welfare.

The time has come to effectively dismantle wall street through extreme regulation and intense oversight; criminals need to be held in check and incarcerated.

[HamdenRice]

2. 2 Sincere wishes: 1. People would use credible sources. 2. DUers learn to read a balance sheet

1. The source for your OP also has the following headlines and claims on the very same page that it trumpets the cost of the bailout:

"Top Scientists Ask Journal Science To Retract Original AIDS Papers

Thirty-seven doctors, senior researchers and attorneys have asked the journal Science to retract four articles published in 1984 that supposedly established that HIV was the cause of AIDS..."

"A Call for a Re-evaluation of the AIDS Dogma"

"Everything You Know About AIDS is Wrong"

"Who Owns "the Fed"?"

OK, so they don't believe AIDS is caused by HIV, they are anti-Fed goldbugs, and you are citing them as a definitive source on the cost of the bailout.

2. I have yet to see a convincing balance sheet on the cost of the bailout -- but then again, if one were produced, most people wouldn't be able to read it, because they don't know the difference between an expenditure and an investment asset. At least $2 trillion of the Fed's participation in the bailout is the purchase of commercial paper and reciprocal currency arrangements with central banks of other countries. War, by contrast, is outright expenditure.

[Common Sense Party]

6. Some wishes never come true.

You just listed two.

[fedsron2us]

3. A trillion her and a trillion there. Pretty soon we will be talking serious money.

[SergeyDovlatov]

4. US will end up either defaulting or inflating to cover the deficit and mounting debt

I don't see the way out.

[Common Sense Party]

5. Casey Research? a.k.a. Casey Spinkelman, who lives in a trailer

park in Montpelier.

These numbers are complete crap. But I give him a B+ for creativity.

[GliderGuider]

7. What's interesting to me is that

The size of the bailout in all its various manifestations is of the same order of magnitude as the most expensive war the USA ever fought (WWII at 4.1 trillion current dollars).

The total amount of value lost in the equity markets last year was six or seven times that, and this year's looking even worse.

Viewed from 50,000 feet the bailouts are a simple transfer of money from the taxpayer to the banks. Given the size and nature of the global financial problem, any politically feasible bailout package (or series of packages) is unlikely to help. In fact, it stuns me that the ones being handed out are considered politically acceptable.

[HamdenRice]

8. This is, once again, utter nonsense

1. Can you substantiate your total? 2. Can you separate expenditures from loans?

You have posted this sort of thing several times, but you've never seemed to indicate that you understand the difference between an investment/loan and an expenditure.

Was the federal government paid back for any tank or plane built during WWII?

What portion of the bailout is attributable to the actions of the Fed? And of those how much has been paid back into the revolving facility?

Fortunately, I've tracked down the spread sheet that seems to be the source of all the $8+ trillion hysteria. Here is a jpg of the spread sheet:



You can also see a good explanation of the bailout totals here:

http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/

According to these spread sheets, the total cost of the bailout so far in terms of actual expenditures is $317 billion.

The bulk of that is:

$168 billion -- tax relief for families
$8 billion -- unemployment benefits
$125 billion -- AIG expenditures -- but it's hard to tell if these are costs or investments. The Fed says they are just credit extensions, and if so should not be in this total
$16.7 billion -- FDIC payouts in 2008 to depositors of failed banks
.470 billion -- FDIC payouts in 2009

Notice how many line items that go into the $8 trillion number are extensions of credit, lending facilities by the Fed that involve collateral or loan guarantees that haven't been called (hence designed mainly for psychological effect on the market). In essence, the Fed is trading dollars for securities, which means that the Fed has not made an expenditure, but traded one asset (cash) for another asset (eg commercial paper or foreign currency). Even the incredibly badly managed TARP program is an investment in securities, preferred stock -- which, btw, unlike common stock have a face value, interest rate and requirement that the banks buy them back at face value. Note especially how many of them have a draw down of zero -- ie they haven't even been used yet.

[GliderGuider]

9. I'm willing to accept CRS's account of war costs.

Bailout costs are much murkier. I found this, that treads the line between "We're OK, Jack" and $8.5 Trillion:

Bailout Price Tag: $3.5T So Far, But 'Real' Cost May Be Much Higher

• $2T Emergency Fed Loans (the ones the Fed won't discuss, as detailed here)
  
• $700B TARP (designed to buy bad debt, the fund is rapidly transforming as we'll discuss in an upcoming segment)
  
• $300B Hope Now (the government's year-old attempt at mortgage workouts)
  
• $200B Fannie/Freddie
  
• $140B Tax Breaks for Banks (WaPo has the details)
  
• $110B: AIG (with it's new deal this week, the big insurer got $40B of TARP money, plus $110B in other relief)

Tallying up the "true" cost of the bailout is difficult, and won't be known for months if not years. But considering $3.5 trillion is about 25% of the U.S. economy ($13.8 trillion in 2007) and the U.S. deficit may hit $1 trillion in fiscal 2009, hyperinflation and/or sharply higher interest rates seem likely outcomes down the road.

I agree that much of it is loans. The question is, given the growing trend toward counterparty insolvency we're seeing, how many of these "loans" will actually be paid back? I think it's safe to expect a fairly high default rate once the crap-train really gets rolling. As a result, I'm quite comfortable with putting loans in the "Kiss it goodbye" column.

Given that assumption, $3.5T is definitely in the same order of magnitude as $4.1T. You may disagree with the it, but I'm convinced that $3.5T presents a far truer picture of the actual state of affairs than your $317B.

[HamdenRice]

10. "counterparty insolvency " -- Did you even bother to read the spread sheet?

Most of that counter party risk is (1) commercial paper and (2) foreign central banks.

Commercial paper is paid back in 30-180 days, so its pretty easy for the Fed to avoid buying cp of a company on the brink of collapse.

Your gut may tell you to "kiss it goodbye" but that only proves why making policy based on what your gut tells you (the Bush approach) is not as efficacious as basing policy on careful analysis (the Obama approach).

[GliderGuider]

11. I'm not making policy, I'm making personal plans.

None of us on here are policy advisors. If we were we wouldn't be wasting time chit-chatting on a web site. The main value sites like this have is to give ordinary people some sense of what's really going on behind the spin, flim-flam and propaganda that suffuses the MSM. My sense is that we are being fed a line of shit (whether deliberately or inadvertently) by those who tell us that the official numbers approximate the true story. I'm comfortable making my personal plans based on the assumption that the official story is Polyanna Hokum, because of the following:

• If they are right and I assume they are wrong I will lose a little;
  
• If they are wrong and I assume they are wrong I will save my ass;
  
• If they are wrong and I assume they are right, I will lose everything.

The only reasonable choice from a personal planning perspective is to assume the official story is wrong.

[HamdenRice]

12. Others are also making personal plans. Should you feed them demonstrably false information?

Even if you don't think you're making policy, you are spreading information and misinformation upon which others will act. Do you believe that you have a responsibility, therefore, not to spread demonstrably and obviously false "information"?

[GliderGuider]

13. I should tell them what I personally think the truth is.

Risk management theory tells us that people have much less to lose if they plan for bad outcomes that don't materialize than if they plan for good outcomes that don't materialize.

The consequences of making a decision based on your assumptions about the future if they turn out to be wrong will be much more harmful than an erroneous decision based on mine. That's what my quasi-truth-table in my previous post was all about.

And assumptions always come into play when making decisions, because even if we start with the facts you swear are "correct", we still have to make assumptions to decide how those facts might change tomorrow, next week or next year.

If you are right and I'm wrong, people who make decisions based on my assumptions might end up learning gardening unnecessarily, or maybe living in a commune. If I am right and you are wrong, people who make decisions based on your assumptions can end up starving to death in Hoovervilles.

[Rydz777]

15. I look for your posts and read them with interest.. My personal

views seem to parallel yours, but in any case, we all make our own choices. My bias is to prepare for the worst, and if everything comes up roses, then I'll happily smell the roses.

[Zynx]

14. We have not spent $8.5 trillion or anything close to it.

I don't see the $17 trillion national debt that would have had to occur for that.