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November 24, 2008

US Prepared to Pledge Up to Seven Point Seven Trillion to Relieve Credit Crisis?

We are?

Ignore the 7.4 quoted by Hawkins below -- the article has since been updated to fix the number at 7.76 trillion.

The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

...The worst financial crisis in two generations has erased $23 trillion, or 38 percent, of the value of the world's companies and brought down three of the biggest Wall Street firms.

...The money that's been pledged is equivalent to $24,000 for every man, woman and child in the country. It's nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country's mortgages.

...Bernanke's Fed is responsible for $4.4 trillion of pledges, or 60 percent of the total commitment of $7.4 trillion, based on data compiled by Bloomberg concerning U.S. bailout steps started a year ago.

"Too often the public is focused on the wrong piece of that number, the $700 billion that Congress approved," said J.D. Foster, a former staff member of the Council of Economic Advisers who is now a senior fellow at the Heritage Foundation in Washington. "The other areas are quite a bit larger."

This is scary. The government has now gotten itself a little bit pregnant eight and a half months pregnant and ready to drop pregnant with these bailouts, and has pledged so much in "backstop" funds that if things should companies slide even more badly, they'll bankrupt the government with them.

This was something I hadn't considered before. Stupidly. But at least if the government had kept away from bailouts, the government itself would still be in (relatively) decent shape after everything came crashing down, and ready to assist after the bloodletting was over. But now it's on the hook for all this money, which I have to think will most likely be lost, and it can't possibly meet those obligation except by revving up the printing presses and destroying its credit rating and effectively ending its position as lender of last resort.

The horses are going over the cliff, and rather than cut them free, we've lashed them more tightly to the coach. Either we're going to save those horses, or we're going down the chasm with them.

Michelle Malkin writes of the bailout of Citigroup, to the tune of $306 billion in federal pledges for this one institution alone. She is, as you might guess, not a fan.

Is it too late to cut the horses loose, or are we now bound to them too tightly so that if they go, we go, and there's no other alternative but to pull them back in? I don't know.

These scary quotes from Allah suggest we're in awful shape no matter what happens.


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posted by Ace at 04:00 PM

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