Monday, November 24, 2008

U.S. PREPARED TO LEND $7.4 TRILLION TO FINANCIAL SYSTEM

Bloomberg - 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 unprecedented pledge of funds includes $2.8 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 only 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.

When Congress approved the TARP on Oct. 3, Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson acknowledged the need for transparency and oversight. Now, as regulators commit far more money while refusing to disclose loan recipients or reveal the collateral they are taking in return, some Congress members are calling for the Fed to be reined in.

"Whether it's lending or spending, it's tax dollars that are going out the window and we end up holding collateral we don't know anything about," said Congressman Scott Garrett, a New Jersey Republican who serves on the House Financial Services Committee. "The time has come that we consider what sort of limitations we should be placing on the Fed so that authority returns to elected officials as opposed to appointed ones.". . .

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.

President Franklin D. Roosevelt's New Deal of the 1930s, when almost 10,000 banks failed and there was no mechanism to bolster them with cash, is the only rival to the government's current response. The savings and loan bailout of the 1990s cost $209.5 billion in inflation-adjusted numbers, of which $173 billion came from taxpayers, according to a July 1996 report by the U.S. General Accounting Office.

2 Comments:

At November 25, 2008 12:13 AM, Blogger Lars said...

This is disastorous. Memo to Washington, flushing dollars (issued with debt) while states and cities cut budgets, companies cut employees, is not the way to boost the economy. Putting people to work is the way to do it. This money would be far better invested in healtcare, education, infrasctructure, childcare, elder care, agriculture, research. What many might call the commons. Propping up banks that created money out of thing air is a sure fire way to create future ruin for the populace.

 
At November 26, 2008 12:55 AM, Anonymous Anonymous said...

Al-Qaeda need not fire a shot. With the likes of Paulson, Bernanke, Geithner, and Summers taking US down the toilet bowl to ruin, a failed, broken down, bankrupt society awaits our future. Who says you can't polish a turd?

 

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