They are admitting that it is going to take a lot more than fiscal stimulus and the already pledged hundreds of billions of bailout dollars to ensure stability in the financial system. In a speech in London this week, Ben Bernanke said that more capital injections and guarantees are necessary to ensure stability in the financial system.
Obama has called the situation “dire” and his transition team of economic advisors is lobbying hard to get the remaining $350 billion in TARP funds released by Congress. While Congress angles for increased influence on how this money is spent, Obama and his team are starting to make the case that many more hundreds of billions of taxpayer dollars will be needed to shore up bank balance sheets before the banking system can perform its normal function of lending again.
We have been saying for months that the sooner the banks are recapitalized, the cheaper the total cost will be. Delaying only increases the clogs in the financial system, and further damages the millions of companies and businesses that are the keys to economic prosperity. A non-functioning banking system destroys good businesses as well as bad businesses.
Below is an excerpt from CNNMoney.com tracking where the federal bailout money has gone thus far. The link is: http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/index.html
Who is getting the bank bailout money – CNNMoney.com
SPECIAL REPORT Issue #1: America’s Money Crisis Issue #1: America’s Money Crisis Column Archive
Economy rescue: Adding up the dollars
The government is engaged in an unprecedented – and expensive – effort to rescue the economy. Here are all the elements of the bailouts:
Date Bailout Allocated Spent
December 2007 Term Auction Facility $1.6 trillion $1.6 trillion
February 2008 Economic Stimulus Act of 2008 $168 billion $168 billion
March 2008 Bear Stearns bailout $29 billion $29 billion
March 2008 Discount window n/a $131.9 billion1
May 2008 Student loan guarantees $9 billion unknown
September 2008 Fannie Mae and Freddie Mac $200 billion $13.8 billion
September 2008 Foreign exchange dollar swaps unlimited n/a
October 2008 FHA housing rescue $320 billion unknown
October 2008 Auto industry energy efficiency loans $25 billion $0
October 2008 Troubled Asset Relief Program $700 billion $276.3 billion
November 2008 AIG capital investment $40 billion $40 billion
October 2008 Bank capital investments $250 billion $192.3 billion
November 2008 Citigroup capital investment $20 billion $20 billion
November 2008 Citigroup loan loss backstop $5 billion $0
November 2008 TALF loss provisions $20 billion $0
December 2008 Auto industry bailout $23.4 billion $14 billion
December 2008 General Motors $13.4 billion $4 billion
December 2008 Chrysler $4 billion $4 billion
December 2008 GMAC $6 billion $6 billion
October 2008 Money market guarantees $659 billion unknown
October 2008 Commercial Paper Funding Facility $1.4 trillion $331.7 billion
November 2008 Unemployment benefit extensions $8 billion $8 billion
November 2008 AIG $152.5 billion $127.7 billion3
November 2008 Treasury capital investment $40 billion $40 billion
November 2008 Bridge loan $60 billion $39.5 billion
November 2008 Collateralized debt obligation purchases $30 billion $28.2 billion
November 2008 Mortgage-backed securities purchases $22.5 billion $20 billion
November 2008 Commercial paper purchases $20.9 billion unknown
November 2008 Citigroup loan-loss backstop $300 billion $0
November 2008 Term Asset-Backed Securities Loan Facility $200 billion $0
November 2008 GSE mortgage-backed securities purchases $500 billion $0
November 2008 GSE debt purchases $100 billion $0
November 2008 FDIC Temp. Liquidity Guarantee Program Unlimited unknown
2008 FDIC bank takeovers $16.7 billion $16.7 billion
Total: $7.2 trillion $2.7 trillion
Note: Figures as of Jan. 9, 2009
http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/index.html (2 of 2)1/14/2009 8:42:19 AM
The fact is that much of the decision-making power of the financial and banking system now resides in Washington D.C. Washington usually works at a very different pace than does the marketplace, and businesses trying to operate without a functioning banking system can ill afford to wait. Delay now will mean a longer and deeper recession/depression and a much bigger capital injection later. As the old saying goes, a stitch in time saves nine.
Fed Chairman Bernanke, and President-elect Obama are beginning to beat the drum, but should pick up the cadence, and do so immediately.
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