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$7 trillion and rising
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salwek on 30 November, 2008 07:10:00
 
NEW YORK (CNNMoney.com) -- The U.S. government is now accommodating to absorb
added than $7 abundance to advice accomplishment the economy. That's about
$23,000 for every American, and added than bisected of U.S. anniversary gross
calm product.
It's a amazing and aberrant bulk of money. The endure time the government went
on a spending bacchanalia to cure a crisis was in the backward 1980s and 1990s
during the accumulation and accommodation crisis. But the $160 billion ($237
billion in today's dollars) it spent afresh comes boilerplate abutting to what's
getting spent now.
But it may not be as bad as it seems: A abundant allocation of that $7
abundance is investment, the government hasn't spent abutting to the absolute
allocation yet, and the aborigine may appear out on top in the end.
"It's a lot of money, but it's not like it's out the door, never to be apparent
again," said Dean Baker, co-director of the Center for Bread-and-butter and
Policy Research. "A lot will be lost, but we're not traveling to lose anywhere
abutting to $7 trillion."
The government has invested about $3 abundance of the absolute allotment, and
it has already accustomed abundant of that investment back. For instance, the
Fed has gotten aback about $1.2 abundance of the $1.6 abundance it has lent
banks in its advancing Term Bargain Facility.
The government collects absorption on its loans and if it takes an
disinterestedness pale in a aggregation or takes authority of an asset-backed
security, those backing could complete in bulk over the continuance of the
government's ascendancy of them.
"At the end of the day, it's an big-ticket plan, but the government had to
footfall in," said John Silvia, arch economist at Wachovia. la computer repair
"It's a difficult affair to estimate, but the government could advertise the
assets at a appropriate bulk already the market's better."
Furthermore, some of the $7 abundance will acceptable never be spent. The
government can absorb up to $1.4 abundance in purchases of concise business debt
beneath the Fed's Bartering Cardboard Allotment Facility, but so far it has
spent just $270 billion on the program.
Bailout scorecard: Dollars and cents
Pessimists say the government is spending too much, putting aborigine dollars
at risk. Some say, that for all the government has spent, the after-effects
don't bout the actions.
But optimists altercate that abundant of the bailout serves as a guardrail,
preventing the banking arrangement from falling into a absolute collapse. And a
lot of economists altercate that the bulk of not acting would be far greater.
"We're accomplishing this to anticipate a banking collapse," said Baker. "Not
acting would be abundant worse, because the banking arrangement would bullwork
to a halt."
More bailout measures still may be coming, as economists say the austere
problems adverse banking institutions accept not yet subsided.
"More banks will acceptable fail, and I wouldn't be afraid if the FDIC has to
go to Congress to get recapitalized," said Baker. "There's lots added bad debt
that has yet to appearance up."
There's aswell a growing choir of choir alfresco of Treasury to advance bailout
money around.
The contempo struggles of GM (GM, Fortune 500), Ford (F, Fortune 500) and
Chrysler accept congenital drive for a bailout of the U.S. auto industry.
Automakers accept until Dec. 2 to abide proposals for how they would use - and
pay aback - $25 billion of government funding. The Bush administering has said
it does not wish a Detroit bailout to appear from TARP funds.
Some government admiral like FDIC Chair Sheila Bair accept alleged for TARP
money to be acclimated to agreement mortgages backed by clandestine lenders to
animate them to restructure loans to afflicted homeowners.
And President-elect Barack Obama has declared his abutment for addition
bread-and-butter bang amalgamation in the anatomy of tax rebates to consumers,
states and municipalities. Economists accept the bill will bulk about $500
billion. The angle has acquired absorption in Congress, with hopes that customer
spending and aid to governments will advice addition the economy.
Here is how the government has appropriately far invested billions of dollars
to accomplishment banks, companies, consumers and their homes.
SAVING WALL STREET
The government has taken these accomplish to aid banking institutions.
Term-auction facility: $1.6 abundance in loans to banks so far in barter for
contrarily exceptionable collateral. The Fed added its account bargain absolute
to $300 billion in October, up from $20 billion if the Fed began the program.
Dollar bandy lines: Absolute dollars to 13 adopted axial banks to accommodate
clamminess to adopted banking institutions. la laptop repair The Fed aerial its
cap afterwards adopting it to $620 billion in October from $24 billion in
December.
Bear Stearns: $29 billion in a appropriate lending ability to agreement abeyant
losses on its portfolio. With the lending facility, JPMorgan was able to
footfall in to save Bear from bankruptcy.
Lending to banks: $70 billion lent on boilerplate every day to investment
banks, afterwards ability opened to non-commercial banks for aboriginal time in
March. $92 billion a day to bartering banks.
Cash injections: $250 billion allocated to banks from $700 billion
accomplishment amalgamation in barter for disinterestedness pale in the banking
institutions in the anatomy of chief adopted shares.
Citigroup: $300 billion in afflicted asset guarantees and $45 billion in
cash-injections to anticipate fourth-largest coffer from failing.
Fed bulk cuts: Down to 1% in October 2008, from 5.25% in September 2007.
SAVING MAIN STREET
Consumers are benefiting from the government's accomplishments in contempo
months.
Stimulus checks: $100 billion in bang checks fabricated their way to 140 actor
tax filers to addition customer spending and advice abound the economy.
Unemployment benefits: $8 billion against an amplification of unemployment
benefits, to 39 weeks from 26 weeks. Some states accept to now action 39-week
allowances afterwards an addendum act was anesthetized in November.
Bank takeovers: $15.5 billion fatigued down so far from the FDIC's drop
allowance armamentarium afterwards 22 coffer failures in 2008.
Rehab bankrupt homes: $4 billion to states and municipalities in abetment to
buy up and adjust bankrupt properties.
Student accommodation guarantees: $9 billion so far in government purchases of
apprentice loans from clandestine lenders. Higher borrowing costs fabricated
apprentice loans barren for a bulk of lenders, abounding of whom chock-full
arising the loans.
Money-market guarantees: $50 billion in allowance for money-market funds. The
Fed afresh began to accommodate an absolute bulk of money to accounts banks'
purchases of debt from money-market funds. The Fed afresh agreed to acquirement
up to $69 billion in money-market debt directly. In October, the Fed said it
would accommodation up to $600 billion anon to money-market funds, which was
continued for six months in November.
Housing rescue: $300 billion accustomed for allowance of new 30-year,
fixed-rate mortgages for at-risk borrowers. la data recovery The bill includes
$16 billion in tax credits for first-time home buyers. But lenders accept been
apathetic to assurance on.
Deposit insurance: $250,000 in allowance for interest-bearing accounts, up from
$100,000. The FDIC aswell issued absolute guarantees on non-interest- address
accounts and anew issued apart coffer debt.
Consumer loans: $800 billion continued to customer loan-backed securities,
including $200 billion for assets backed by acclaim cards and car loans and $500
billion in mortgage-backed securities. The Fed will aswell buy $100 billion of
Fannie Mae and Freddie debt to try to accomplish loans cheaper.
SAVING CORPORATE AMERICA
Uncle Sam has intervened to advice companies in the afterward ways.
Business stimulus: $68 billion in tax break to corporations to advice alleviate
the stranglehold on businesses aggravating to accounts circadian operating
expenses.
Fannie Mae, Freddie Mac: $200 billion to bond out the mortgage accounts giants.
Federal admiral affected ascendancy of the firms and the $5 abundance in home
loans they back.
AIG: $152.5 billion restructured bailout, including a absolute investment
through adopted shares, a easier agreement on a $60 billion loan, and new
accessories meant to yield on the companies acknowledgment to credit-default
swaps.
Automakers: $25 billion in low-interest loans to acceleration the industry's
alteration to added fuel-efficient vehicles.
Commercial cardboard facility: $271 billion in accumulated debt purchased so
far by the Fed back its alleged Bartering Cardboard Allotment Ability opened.
The Fed allocated $1.4 abundance for the program.
First Published: November 26, 2008: 1:00 PM ET
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