Thursday, September 24, 2009

The US Bailout

These are big numbers.

The really interesting question is what happens when the stimulus and guarantees are withdrawn.

Editorial NYT 
"Calculations compiled for The New York Times show that the government has collected profits of $4 billion from eight of the biggest banks that have fully repaid their obligations under the Treasury’s main bailout program — a return of about 15 percent annually. Calculations reported in The Wall Street Journal showed that the Treasury made $5 billion from 34 firms that repaid bailout money, for a 7 percent annualized rate of return. [TC: sounds like a lot but compared to the 'investment'!!!!]

That’s better than losing money on any given transaction. But the big picture is bleak. Estimates by Moody’s , presented in recent Congressional testimony, suggest that of the $12 trillion the government has committed to fight the financial crisis and recession, the final tab to taxpayers will approach $US1.2 trillion [TC: Aus yearly GDP is about $A1.1 trillion]. That is equal to about 8 percent of the size of the economy. For comparison, the savings-and-loan crisis of the early 1990s ultimately cost taxpayers some $250 billion in today’s dollars, or about 3 percent of the size of the economy.

Worse, there is still much that the public does not know about the rescues. The Treasury still does not require banks to specify how they are using their bailout dollars, despite recommendations from the bailout’s special inspector general that the government demand a periodic accounting. Lawmakers and the public have no precise information about the roughly $300 billion in Citigroup assets that the government has guaranteed. Nor has there been an airing of the terms of the derivatives contracts that the government paid off in the bailout of the American International Group."

No comments:

Post a Comment

Please be civil ...