It’s been claimed that the cost to US taxpayers in bank bailouts was $9 trillion.
No! The bailouts, and the loans, have been paid back; the government made a profit on the AIG bailout. There was risk, but long run tax burden has not risen by $9 trillion.
As of December 31, 2012, the Treasury had received over $405 billion in total cash back on Troubled Assets Relief Program investments, equaling nearly 97 percent of the $418 billion disbursed under the program.
But TARP was just a small part of the whole picture. What concerns me is that there seem to have been somewhere between $1.2 trillion and $16 trillion in secret loans from the Fed to big financial institutions and other corporations. Even if they’ve been repaid, the low interest rates might represent a big transfer of wealth from the poor to the wealthy. And the fact that I’m seeing figures that differ by more than an order of magnitude is far from reassuring, too! The GAO report seems to be worth digging into.
As of December 31, 2012, the Treasury had received over $405 billion in total cash back on Troubled Assets Relief Program investments, equaling nearly 97 percent of the $418 billion disbursed under the program.
But TARP was just a small part of the whole picture. What concerns me is that there seem to have been somewhere between $1.2 trillion and $16 trillion in secret loans from the Fed to big financial institutions and other corporations. Even if they’ve been repaid, the low interest rates might represent a big transfer of wealth from the poor to the wealthy. And the fact that I’m seeing figures that differ by more than an order of magnitude is far from reassuring, too! The GAO report seems to be worth digging into. If not mathematicians, at least accountants could be helpful for things like this!
The Fed’s balance sheet isn’t anywhere approaching $16T—the last I looked it was under $2T. About half of that is growth since the recession hit, in the form of the Fed printing money and loaning it out. If the $16T number is anything more than a fever dream, the number comes from something like “We loaned $1 to you yesterday, you paid it back, now we’re loaning $1 to my mother, so that’s $2 of loans”—literally true, but you’re counting the same dollar multiple times.
Taxpayers aren’t on the hook for “loans” made by the Federal Reserve. And we’re in a liquidity trap—until the economy recovers and nominal interest rates rise above the zero lower bound, the Fed can print all the cash it wants without causing inflation (because people are going to save, rather than spend or invest, that cash). Which is pretty much what happened. The U.S. monetary base tripled between 2008 and 2011 and yet prices have not risen accordingly.
Well from 2009-2013, the US government spent $18.3 trillion in total. Do you really think that half of that went to banks, instead of old people and soldiers?
Saying the bailouts cost $9T is like saying that the derivative market is measured in trillions of trade a day—yes, that’s the face value, but it’s not the actual amount of cash trading hands, any more than the travel insurance I bought today with $10M of coverage is a $10M contract.
No! The bailouts, and the loans, have been paid back; the government made a profit on the AIG bailout. There was risk, but long run tax burden has not risen by $9 trillion.
According to Wikipedia:
But TARP was just a small part of the whole picture. What concerns me is that there seem to have been somewhere between $1.2 trillion and $16 trillion in
secret loans from the Fed to big financial institutions and other corporations. Even if they’ve been repaid, the low interest rates might represent a big transfer of wealth from the poor to the wealthy. And the fact that I’m seeing figures that differ by more than an order of magnitude is far from reassuring, too! The GAO report seems to be worth digging into.
Can you give a reference?
According to Wikipedia:
But TARP was just a small part of the whole picture. What concerns me is that there seem to have been somewhere between $1.2 trillion and $16 trillion in secret loans from the Fed to big financial institutions and other corporations. Even if they’ve been repaid, the low interest rates might represent a big transfer of wealth from the poor to the wealthy. And the fact that I’m seeing figures that differ by more than an order of magnitude is far from reassuring, too! The GAO report seems to be worth digging into. If not mathematicians, at least accountants could be helpful for things like this!
The Fed’s balance sheet isn’t anywhere approaching $16T—the last I looked it was under $2T. About half of that is growth since the recession hit, in the form of the Fed printing money and loaning it out. If the $16T number is anything more than a fever dream, the number comes from something like “We loaned $1 to you yesterday, you paid it back, now we’re loaning $1 to my mother, so that’s $2 of loans”—literally true, but you’re counting the same dollar multiple times.
They might represent a transfer from taxpayers to bondholders and shareholders of banks, but not to the tune of $9 billion.
Also thank you for providing the reference I was in too much of a hurry to.
Typo: you meant, “trillion”.
Taxpayers aren’t on the hook for “loans” made by the Federal Reserve. And we’re in a liquidity trap—until the economy recovers and nominal interest rates rise above the zero lower bound, the Fed can print all the cash it wants without causing inflation (because people are going to save, rather than spend or invest, that cash). Which is pretty much what happened. The U.S. monetary base tripled between 2008 and 2011 and yet prices have not risen accordingly.
Well from 2009-2013, the US government spent $18.3 trillion in total. Do you really think that half of that went to banks, instead of old people and soldiers?
Saying the bailouts cost $9T is like saying that the derivative market is measured in trillions of trade a day—yes, that’s the face value, but it’s not the actual amount of cash trading hands, any more than the travel insurance I bought today with $10M of coverage is a $10M contract.