Calculating the Cost of Wall Street's Rescue

Consider the numbers: $29 billion for the Bear Stearns mess; $700 billion to buy spoiled assets; $200 billion to buy stock in Fannie Mae and Freddie Mac; an $85 billion loan to AIG insurance; another $37.8 billion for AIG; and $250 billion for bank stocks. Hundreds of billions in guarantees to back up money market funds and to guarantee bank deposits. And who knows what expenses are still to come.

Consider the numbers: $29 billion for the Bear Stearns mess; $700 billion to buy spoiled assets; $200 billion to buy stock in Fannie Mae and Freddie Mac; an $85 billion loan to AIG insurance; another $37.8 billion for AIG; and $250 billion for bank stocks. Hundreds of billions in guarantees to back up money market funds and to guarantee bank deposits. And who knows what expenses are still to come.

Though the eventual tally is impossible to pinpoint, some experts suggest the annual deficit -- the amount borrowed to make up the differences between spending and revenue -- will soar. In an early October television interview, Peter Orszag, director of the Congressional Budget Office, forecast that rescue spending and falling tax revenue from a recession could create a $750 billion deficit in the current fiscal year, up from the $455 billion of the just-ended year. The deficit was about $163 billion in 2007. The Concord Coalition, a non-partisan deficit-fighting organization, says next year's figure could exceed $1 trillion. As it approved rescue packages, Congress last summer and this fall raised the debt ceiling to $11.3 trillion from $9.8 trillion. Currently, the debt stands at just over $10 trillion.

The debt is the build-up of annual deficits, which run in cycles, says Marston. During recessions, tax revenue falls along with economic activity, causing deficits to rise. Deficits are typically gauged as a percentage of the gross domestic product, and economists generally worry when this figure exceeds 3%. In 2007, it was 1.2%; in 2008 it jumped to 3.2%. A trillion dollars would be 7% -- or more if the economy shrinks -- the highest since the 6% of the 1980s. Before 2008, deficits had fallen for several years because the relatively strong economy lifted tax revenues. In recent years, the deficit has been relatively low by historical standards. It has averaged just over 4% of GDP since World War II. The budget was in surplus from 1998 through 2001.

Deputy Secretary Robert M. Kimmitt Remarks at the Dubai International Financial Centre

Below is a statement by a treasury official showing what they have done and failed to stem the real problems at hand. They need to get a grip on reality and begin helping those that truly need it. HOW ABOUT PROSECUTING THOSE RESPONSIBLE FOR THE CURRENT SITUATION. This will never happen as they would have to prosecute and jail their contributors and friends.

For its part, the U.S. Government has taken a number of bold steps to stabilize markets; mitigate the systemic impact of a number of failed institutions; and address the underlying sources of market uncertainty. These measures include:

First, in early September, the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac, the government-sponsored enterprises that are the largest sources of mortgage finance in the United States, into conservatorship. Under the conservatorship, Treasury will ensure that each company maintains positive net worth and can fulfill its financial obligations.

Second, central banks from around the world have acted together in recent months to provide additional liquidity for financial institutions. The U.S. Federal Reserve has established swap lines with a number of central banks to reduce pressures in global short-term U.S. dollar markets. Moreover, to further increase access to funding for businesses in all sectors of our economy, the Federal Reserve just yesterday launched a Commercial Paper Funding Facility, which provides a broad backstop for the commercial paper market by funding purchases of commercial paper of three-month maturity from high-quality issuers.

Third, in early October, Treasury implemented a temporary guaranty program for the U.S. money market mutual fund industry, which had experienced funding problems. This temporary $50 billion guaranty program offers government insurance to assure investors that these money market investments are safe and accessible. The Federal Reserve has followed up with its Money Market Investor Funding Facility, which supports a private sector initiative designed to provide liquidity to U.S. money market investors.

Fourth, with the support of Treasury and the Federal Reserve, the FDIC has temporarily guaranteed newly-issued senior unsecured debt of all FDIC-insured institutions and their holding companies, as well as deposits in non-interest bearing deposit transaction accounts. These actions are specifically designed to unlock interbank lending by mitigating counterparty risk. Regulators will implement an enhanced supervisory framework to assure appropriate use of this new guarantee. This important action, combined with the increase in the FDIC's deposit insurance from $100,000 to $250,000, will provide confidence in the banking system and encourage liquidity between banks in the United States.

Fifth, and what has attracted the most attention, Congress passed and the President signed a financial rescue package that includes, among many provisions, the authority for Treasury to purchase troubled assets from banks and financial institutions and also to inject capital into banks through a voluntary capital purchase program. In mid-October, nine of the largest U.S. financial institutions indicated that they would seek an aggregate of $125 billion, and Treasury has begun to approve capital injections into other institutions on a rolling basis.

All this government intervention and still we spiraling further into the recession and likely depression. The government obviously does not know what they are doing. All they are accomplishing is disavowing failure as an option, which in the real world it is, and aiding those that caused this problem to begin with. They need to look in the mirror as they are part of the problem not part of the solution.

Bernanke Strikes Again

After the first deficit busting stimulus package failed to forestall the current economic downturn and aid in any way the prevention of the current financial markets disaster the Fed Chairman is proposing another stimulus package. This one will ONLY cost approximately $150 Billion dollars. He must be planning an additional shift at the printing plant to print more money and further reduce its value.

Here is his statement before the Before the Committee on the Budget, U.S. House of Representatives 10-20-2008.

"I understand that the Congress is evaluating the desirability of a second fiscal package. Any fiscal action inevitably involves tradeoffs, not only among current needs and objectives but also--because commitments of resources today can burden future generations and constrain future policy options--between the present and the future. Such tradeoffs inevitably involve value judgments that can properly be made only by our elected officials. Moreover, with the outlook exceptionally uncertain, the optimal timing, scale, and composition of any fiscal package are unclear. All that being said, with the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate."

King Henry Misjudged Again

“The broad authorities in this legislation, when combined with existing regulatory authorities and resources, gives us the ability to protect and recapitalize our financial system as we work through the stresses in our credit markets.” – Secretary Henry M. Paulson, Jr., Oct. 3, 2008

It has been three weeks since this statement was made and where are the markets and economy going, in the wrong direction. But what do you expect of a Wall Streeter who was part and parcel of the originating problem.

U.S. Taxpayers to own worthless/failing Banks

Capital Purchase Program- Any financial institution participating in the Capital Purchase Program will be subject to more stringent executive compensation rules for the period during which Treasury holds equity issued under this program. The financial institution must meet certain standards, including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; (3) prohibition on the financial institution from making any golden parachute payment to a senior executive based on the Internal Revenue Code provision; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive.

Can't they just leave us alone and not bankrupt us

In March, the Federal Reserve took unprecedented action to ensure an orderly resolution for Bear Stearns, and in September, authorities around the world took steps to mitigate the impact of the bankruptcy of Lehman Brothers, America's fourth largest investment bank. That same week, the Federal Reserve provided funding to American International Group (AIG) to address the systemic risk that would have resulted from a sudden collapse of the firm. Several weeks later, the FDIC facilitated JPMorgan Chase's acquisition of the banking operations of Washington Mutual, one of America's largest retail banks. The Bush Administration and Congress have taken a number of steps, including a $150 billion stimulus package, to help mitigate the impact on the real economy.

This past summer, investors began to express growing concerns over the stability of Fannie and Freddie and the ambiguity over the scope and certainty of government support for these institutions. In response, Secretary Paulson asked Congress for certain authorities regarding Fannie Mae and Freddie Mac in order to help stabilize and support our financial and housing markets. The Treasury established contractual Preferred Stock Purchase Agreements with both institutions, committing up to $100 billion per institution.

Federal Reserve launched a Commercial Paper Funding Facility (CPFF), which provides a broad backstop for the commercial paper market by funding purchases of commercial paper of three month maturity from high-quality issuers.

Despite the hardening of the government's support for Fannie Mae and Freddie Mac, and the decisive resolutions of Bear Stearns, Lehman Brothers, AIG, Washington Mutual, and Wachovia things are only getting worse. The politicians need to stay out of this as they are part of the root cause and they have little in common with the average citizen.

Main Street Forgotten Again

A week after Paulson announced the administration would spend $250 billion to buy stakes in U.S. banks, the Federal Reserve stepped up Tuesday with a new program to help money market mutual funds that have been squeezed by worried investors demanding to cash out their holdings.

The Fed said it would provide up to $540 billion in financing though a program run by JPMorgan Chase & Co. to purchase from mutual funds certificates of deposit, bank notes and commercial paper. The program, to be called the Money Market Investor Funding Facility, is designed to revive the market for commercial paper, short-term loans that are critical for keeping businesses running.

With this, the taxpayers have now been committed to over 1.7 trillion dollars that is helping those that caused this problem and not helping those affected by it. We need to save Main Street and the real people.

A new Financial Capital of the World

FRS Chairman Ben Bernanke and Treasury Security Hank Paulson with the acquiescence of Congress and President Bush have created a new financial capital of the world in Washington, DC and have started down the road to the nationalization of the US financial system.