The Real Costs of the Bailouts

Wall Street Journal ^ | September 28, 2008 | Sudeep Reddy

[Zakeet]

Last week, as federal regulators seized Washington Mutual in the largest U.S. banking failure, Congress was grappling with whether to spend $700 billion of public money to fix the financial industry's troubles.

Lawmakers' initial reaction to the Treasury Department's staggering request: shock. That sum amounts to about a quarter of the U.S. government's annual spending. It's more than the Pentagon's annual budget, more than the nation pays out each year in Social Security benefits and more than the federal government's cost for Medicare and Medicaid.

Members of Congress then asked the questions that continue to be on many Americans' minds:

• How will the U.S. pay for this program and the previously announced aid to Bear Stearns, Fannie Mae, Freddie Mac and American International Group? (The Washington Mutual seizure doesn't add to the U.S. tab because the bulk of WaMu's operations are being taken over by J.P. Morgan Chase without cost to the Federal Deposit Insurance Corp.)

• And what will these efforts end up costing us all in taxes?

Part of the answer is known today but other aspects -- including the ultimate tab for these rescue programs -- may not be clear for years or even decades.

$1 Trillion Commitment

The total government commitment so far in its current and proposed bailouts: $1 trillion. But most of that money would give the government a claim on assets -- such as home mortgages and insurance operations -- that have actual value.

[Zakeet]

The article's conclusion: Taxpayers are being helped in the long run because stronger financial markets will translate into more economic growth and higher tax revenue.

[Travis McGee]

How will the U.S. pay for this program and the previously announced aid to Bear Stearns, Fannie Mae, Freddie Mac and American International Group?

We'll beg China for the money. They love us. They live only to serve us, and maintain our comfy standard of living (on borrowed cash.)

[RC2]

And Acorn and La Raza are still in the bill? Someone is getting payed off on this one.

[screaminsunshine]

When do they start printing trillion dollar bills? It will save on ink and paper. Or we could just be allowed to print our own if they but em online. Think of the time and trouble it would save. Ladies and Gentlemen. It is over. The ponzi is busted. Who will be the first in line?

[PGalt]

The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially “powerful” states stand out among all the rest. The extent to which this process is going on may be judged from the statistics on emissions, i.e., the issue of all kinds of securities. - Vladimir Ilyich Lenin

The conclusion gives new meaning to the phrase "checks & balances".

[Wolfie]

Why not? We’re handing out free money, after all.

[Need4Truth]

“But they say taxpayers are being helped in the long run because stronger financial markets will translate into more economic growth and higher tax revenue.”

By keeping the loosers in business, we’ll get stronger financial markets. Ya right. That’s part of the moral hazard. The loosers should be eliminated, not supported by people who are willing and able to pay their taxes.

[org.whodat]

But they say taxpayers are being helped in the long run because stronger financial markets will translate into more economic growth and higher tax revenue.”

CEO paid should sky rocket, wait that has happened and one of the reason we are here, change that to moon rocket.

[ari-freedom]

WaMu failed. you can’t say that nobody paid a price. I just don’t want every bank to fail because of freddie mac

[rabscuttle385]

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[Capt. Tom]

The article's conclusion: Taxpayers are being helped in the long run because stronger financial markets will translate into more economic growth and higher tax revenue.

That statement should be put in the context it was taken from. - Tom

With all these rescue efforts, even if the U.S. government profits after its expenses, there's still a broader unquantifiable cost: whether bailing out financial institutions and markets will create expectations for more taxpayer support down the road when Wall Street or big businesses get into trouble.

Government officials acknowledge that risk. But they say taxpayers are being helped in the long run because stronger financial markets will translate into more economic growth and higher tax revenue.

[FreedomHammer]

How could they go so very very wrong.

[Wilhelm Tell]

...whether bailing out financial institutions and markets will create expectations for more taxpayer support down the road when Wall Street or big businesses get into trouble.

I think we just crossed the line from a mixed economy that is moderately free to a Mussolini-style corporate state where government and big business are the same entity. The government will reward big failing businesses and make it hard for any upstart to compete against them. The economy will stagnate as it becomes more corrupt and ineffecient. Just as the Democrats brought us a fascist economic system, they will bring us fascist controls on free speech next.

[Logical me]

Just as the Democrats brought us a fascist economic system, they will bring us fascist controls on free speech next.

Just in case some of the FR's missed this, I copied this sentence again. You are right on.

[Swing_Thought]

I think we just crossed the line from a mixed economy that is moderately free to a Mussolini-style corporate state where government and big business are the same entity. The government will reward big failing businesses and make it hard for any upstart to compete against them. The economy will stagnate as it becomes more corrupt and ineffecient. Just as the Democrats brought us a fascist economic system, they will bring us fascist controls on free speech next.

Well put. The catch phrase for the protection of big business from competition in our brand of fascism; "Too big to fail."

[VOA]

The Real Costs of the Bailouts

Even the most robust Supercomputer in the cosmos would respond to
that question with
"Unable to calculate as outcome likely to be influenced by irrational human
motives like greed/avarice."

Well, the current financial meltdown and the present and future
"collateral damage" will provide grist for thousands of PhD theses
for economy, business and psychology grad students.

[VOA]

The Real Costs of the Bailouts

Even the most robust Supercomputer in the cosmos would respond to
that question with
"Unable to calculate as outcome likely to be influenced by irrational human
motives like greed/avarice."

Well, the current financial meltdown and the present and future
"collateral damage" will provide grist for thousands of PhD theses
for economy, business and psychology grad students.

[JasonC]

You are one of the losers. Line up to be eliminated. You go first.

[ex-Texan]

Looks like Barney Frank ought to get most of the blame for the Fannie and Freddie crisis. Other Democrats lined up behind Barney. Typical shi'ite. Dodd and Pelosi and the whole sleazy, corrupt crowd. Some even took tons of cash and accepted low interest home loans. Payola is supposed to be illegal. Bribery and all those other federal felonies. Barney is used to guys lining up behind him though.

Video: Time Line Proves Bush & McCain Tried to Move on Financial Mess Early (2001, 2003 and 2005)

Many thanks to Little Jeremiah for the great video !

[Need4Truth]

You are correct. I’m one of those that saw this debt problem coming long ago and took steps to protect myself. This bailout makes me a looser. That’s a moral hazard and an unintended consequence.