Is the US Treasury Getting too Big to Fail?

For an administration based on an ideology of untrammeled capitalism and which demands that all socially useful programs meet cost-benefit calculations heavily tilted toward inaction, the government seems to be getting little bang for its buck. Here is a Bloomberg estimate of a commitment of $7.7 trillion. Yes, the government can recoup some of this money, but probably not a lot.

Pittman, Mark and Bob Ivry. 2008. “U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit.” Bloomberg.com (24 November).
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arEE1iClqDrk

“The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago. The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.”
“The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.”

3 comments so far

  1. juliohuato on

    Getting to big or getting too big or getting tooo big or getting toooo big? Not sure.

  2. mperelman on

    Whooops!

  3. Ted Seeber on

    All of the stimulus is being characterized as loans and investment, not grants.

    Which means instead of increasing M1, we’re increasing M3. Since M3 is EXACTLY what got us into this mess to begin with, the more M3 we have, the more deflation it will take to correct it. All these bailouts are doing is making the depression deeper & longer.

    Here’s what it’s going to take to fix this:

    -Eliminate the FED
    -Establish new mints in every city
    -Allow city government, in return for giving up local taxes, to print their own money for daily spending on LOCAL payroll and locally produced durable goods.
    -Tell the WTO that their trade treaties are CANCELED and they are forbidden to meet in the United States, let alone have access to our consumers, for the foreseeable future.

    Nothing short of that will fix the problem.


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