$900 billion rescue / $13.8 Trillion Economy =
7% Bailout.
Do you feel 7% poorer? You are.
Conservatives complain about wealth transfers. Here’s one of the biggest ever executed.
Where is Ben Bernanke’s head? Why is it not on a figurative platter?
I doubt this figure. Most of the special lending facilities instituted are revolving. That is the Fed loans, say $20 billion to Merril Lynch who then repays the loan in 28 days, in part by borrowing another $15 billion.
You add that up and it’s $35 billion, but in fact at the end of the second transaction the Fed is only holding a $5 billion note.
It is only if these entities start defaulting that the Fed actually loses all of that $900 billion.
In the case of AIG the Fed has loaned them $85 billion (at a very high interest rate). Now they are going to watch AIG sell off their assets. As they do the $85 billion will be repaid. In then end it will go to zero and a much smaller company will be returned to shareholders.
It is only if selling off every assett fails to deliver $85 billion that FedGov takes a loss and taxpayers own the bad loan.
“literal” would get the issue resolved much sooner.