Saturday, December 13, 2008

Cost of bailout(s)

Another day, another bailout. So, what is the cost, thus far?

First, the Fed:

Since early August 2007, the Fed's balance sheet has grown from $851 billion to $2.245 trillion as it has created rescue programs such as the commercial-paper facility. In addition, it has drawn down its stockpile of safe Treasury securities from $791 billion to $476 billion to finance programs and lent out $185 billion of Treasury securities to Wall Street firms in exchange for riskier securities. In all, the central bank has already committed about $1.9 trillion to support financial markets ...

$2.245 trillion - $851 billion = $1.394 trillion
791 billion - $476 billion = $ 315 billion
$ 185 billion
$ 1.894 trillion

Though the Fed has written down $2 billion on loans to Bear Stearns, Fed officials consider its programs to be well-secured. It is also earning interest and fees.

Two billion is such a small number in this context.

Next, Treasury:

All together, that's $398 billion invested by the Treasury so far. The Treasury is also sure to tap another $350 billion available to the TARP through funds approved by Congress in October.


The Department of Housing and Urban Development has pledged to commit $300 billion to help homeowners avoid foreclosure.

Adding together rescue money already explicitly committed by the Treasury and Fed brings the dollars spent, loaned or invested to date to $2.3 trillion, a number that is sure to grow and doesn't count fiscal stimulus.

The numbers get much larger when one considers the size of some markets the government has pledged to support. The Treasury has a program to backstop $3 trillion worth of money-market mutual funds. (It hasn't had to tap any funds so far to honor that commitment and has reaped about $800 million in fees on it.)

The Federal Deposit Insurance Corp. is in line to guarantee as much as $700 billion worth of bank debt, according to FDIC estimates. It has also substantially expanded bank-deposit insurance. The Fed is standing behind $1.3 trillion in commercial paper. Various agencies are helping Citigroup to backstop $306 billion in investments.

And counting.

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