Bailout Watch

Bailout Watch

A regular update on all the ways the government is meddling in the market.

Posted Tuesday, November 25, 2008 - 5:33pm

 

Zoop! A second bailout to Citi Group! Paaf! “Supplicating automakers, come back with a better plan to spend our billions!”

 

Finding it difficult to figure out where all your tax dollars (and new government debt) are being shoveled? The Big Money presents Bailout Watch, a handy updated scorecard to help you track the bailout, in all its manifestations, in one place: What’s up, what’s ongoing, what’s delayed, and what’s out.

 

Program What is it? Cost Progress Today's Update
Bank equity injections Treasury plan to buy equity in U.S. banks Approved or pending equity injections now total $250 billion. In addition to backstopping troubled assets and giving it $25 billion worth of TARP aid, the government is spending another $20 billion to get more Citigroup preferred stock.
Auto industry bailout Struggling automakers are looking for support as they run out of cash. $25 billion already allocated for more-efficient vehicles. The industry wants another $50 billion. Humbled! The industry was sent packing by supportive senators last week and told to come up with a better plan. Obama echoed Pelosi and Reid yesterday.
Other TARP funds Congress only authorized $350 billion in TARP funds. Another $350 billion is available to be released by Congress. With today’s $20 billion for the new credit facility, we estimate there’s only $20 billion left in the kitty. So, after hesitating, Paulson is now indicating he might be back for the rest, after all.
Taking over bad assets Treasury purchase of "troubled assets ... residential and commercial mortgage-related assets, which may include mortgage-backed securities and whole loans" This was going to cost as much as $700 billion. Citigroup hits the jackpot! The government stepped in on Sunday to guarantee up to $306 billion in sketchy loans. It’s a multiplayer deal—see here for the potential costs.
Supporting mortgages and direct housing assistance With all the Wall Street support, Main Street is crying out for relief. Estimates range widely. Hard to say what’s happening here. Paulson, who’s the ultimate decider on using the TARP money that would be needed for this to go ahead, was positively Greenspan-ian today: “We’re continuing to work every day on coming up with a program, a TARP program, to mitigate foreclosures. … I am going to run right to the end, and if you’ve got any doubt about that, I tell you, you’re missing the point.”
Company takeovers Government taking majority stakes in Fannie Mae, Freddie Mac, and AIG AIG has now received $150 billion. Fannie and Freddie are getting a lot of support! The government’s buying $100 billion worth of their debt and another $500 billion worth of their mortgage-backed securities.
Helping other lending Fed program to help issuers of credit-card, auto, student, and Small Business Administration loans Up to $200 billion will be lent until the end of 2009 . Twenty billion dollars in TARP money will seed the program. Finally, a Main Street fix? This program was announced this morning, but it may start only in February .
Stimulus package Checks, infrastructure spending, and other funds to spur the economy. First one passed in February: around $168 billion. Pre-election, Obama was talking about $175 billion more. Probably not coming till after inauguration, but it’s going to be big enough to “jolt the economy,” Obama said today. Outside adviser Laura Tyson said $600 billion might be needed.
Support for money market mutual funds A New York Fed plan to buy up short-term commercial paper from money market mutual funds Up to $540 billion in Fed financing is available. This was supposed to begin this week, but the New York Fed wouldn't confirm after a request from The Big Money.
Deposit-insurance increase Until Dec. 31, 2009, the FDIC guarantees the first $250,000 per bank account, up from $100,000. None expected, although banks will have to pay 7 cents more for every $100 insured beginning in 2009. Six banks have gone under since the increase, but they've been taken over by other banks; no need to call on this insurance yet.
Money market mutual fund guarantee Treasury guarantees investors will get at least $1 for every dollar they invest. Up to $50 billion is available. Extended! This program, due to expire at the end of the year, will now run till April 30, 2009.
Interbank lending guarantee The FDIC is guaranteeing bank debt and deposits in banks' own accounts. The FDIC says there'll be no cost to the taxpayer because bank fees will pay for it. Rules have been established and it’s under way, with Goldman Sachs selling $5 billion worth of FDIC-backed notes today. Three other big banks are preparing to enter the market.
Buying commercial paper Fed program to buy up short-term debt to give companies access to cash The Fed has now bought up $271 billion in commercial paper (minimal anticipated cost as issuers have to pay back the money). Look for another weekly update from the Fed after Thanksgiving.

 

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