[lbo-talk] Bailout Total: $29.616 Trillion Dollars: GovernmentAccounting Office says $16 trillion

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Mon Dec 12 09:26:40 PST 2011

Doug writes:

>> CB: Here's the Government Accounting Office figure of $16 trillion.
> What's the point of these dueling estimates, anyway?

Grandma always said: don't compare apples and oranges unless you want to prove redness or smoothness.

Maybe Bernie thinks that he can't get enough attention with the $1.2T number, so he's upped the ante.

(I doubt it'll work)

But Charles: you should probably stop misrepresenting GAO on the $16T number.

> 1) They shouldn't have done it.
> 2) They should have done it but gotten something in return?
> 3) Everyone deserves socialism.
> 4) None of the above.
> I'm for 2) and 3). Anyone else?

I think I'd add:

5) They should have done it in a more transparent manner.

Maybe (5) is part of (2) ... I agree that open market operations can be tricky, since you don't want to trigger a panic against those you're trying to help. But they should have released the details in a more timely manner, and not only after being taken to court about it. I liken it to operational necessity for military operations -- remember that jackass Geraldo Rivera got kicked out of Iraq for drawing pictures in the sand? :-)


I think 2+ years is too long to wait to find out what happened.

And maybe even:

6) Here's concrete proof that a Central Bank can make a huge difference in a world; shouldn't they do it in more than just this one? I'm still waiting for my bailout plan to be organized in a hurry over the weekend.



For a lot of the support that the FRB provided, it's really difficult to put a "cost" on it. Here's an example from the GQO report:

(page 23)

. Late on Thursday, March 13, 2008, the senior management

of Bear Stearns notified FRBNY that it would likely have

to file for bankruptcy protection the following day unless

the Federal Reserve Board provided the firm with an emergency

loan. The Federal Reserve Board feared that the sudden failure

of Bear Stearns could have serious adverse impacts on markets

in which Bear Stearns was a significant participant, including

the repurchase agreements market. In particular, a Bear Stearns

failure may have threatened the liquidity and solvency of other

large institutions that relied heavily on short-term secured

funding markets. On Friday, March 14, 2008, the Federal Reserve

Board voted to authorize FRBNY to provide a $12.9 billion loan

to Bear Stearns through JP Morgan Chase Bank, National Association,

the largest bank subsidiary of JP Morgan Chase & Co. (JPMC),

and to accept $13.8 billion of Bear Stearns's assets as

collateral. Appendix IV includes more information about this

back-to-back loan transaction, which was repaid on Monday,

March 17, 2008, with almost $4 million of interest. This

emergency loan enabled Bear Stearns to avoid bankruptcy and

continue to operate through the weekend. This provided time

for potential acquirers, including JPMC, to assess Bear Stearns's

financial condition and for FRBNY to prepare a new liquidity

program, PDCF, to address strains that could emerge from a

possible Bear Stearns bankruptcy announcement the following Monday.

So sure, $13B is a big number, but it was for just the weekend, and was paid back with a healthy vig. And in some sense it was a riskless loan, or at least a LOT less risky than not making the loan. In fact you can say that the loan was made *in order to lower risk* ...

Page 131 has the $16.115T number (as opposed to page 1 that has the $1.2T number), and it's clear enough to me that it's just a running total of actual loans, not a real composite figure. The chart on page 137 (showing the December 2008 peak of $1.2T outstanding) is a much better picture of the size of the operations. It's nice to have the GAO, I bet the GOP would love to defund it, too.


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