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New Bailout Price Tag: $2.25 Trillion Dollars

Posted By Barry Ritholtz On October 15, 2008 @ 11:00 am In Bailouts,Credit,Dividends,Federal Reserve,Taxes and Policy | Comments Disabled

15bailoutgraf01 [1] On Monday, I said that the total cost of this bailout could scale up to $3 trillion [2] — I just didn’t imagine it would happen by Wednesday.

We learned yesterday that the size of the bailout just tripled, from $750b to $3T. Here is the cost structure:

$250 billion of capital into banks;

Guarantee $1.5 trillion in new senior debt issued by banks;

Insure $500 billion
in deposits in noninterest-bearing accounts (primarily businesses accts).

In exchange for this largesse, the treasury, on behalf of taxpayers, receives:

Preferred shares that pay a 5% (rising to
9% after five years);

•No voting rights for government;

• Warrants to purchase common shares = to 15% of initial investment

All told, its a massive program that makes my earlier forecast of 2-3Trillion obsolete. New forecast is now double: $4-6 trillion dollars . . .

More details at articles below . . .

Sources:
Drama Behind a $250 Billion Banking Deal [3]
MARK LANDLER and ERIC DASH
NYT, October 14, 2008
http://www.nytimes.com/2008/10/15/business/economy/15bailout.html

Bailout Critic: Plan Could Cost $3 Trillion [2]
ALICE GOMSTYN
ABC NEWS Business, Oct. 13, 2008
http://abcnews.go.com/Business/Economy/story?id=6022145&page=1

Americans Embrace Big Government to Help Solve Market Crisis [4]
Edwin Chen and Matthew Benjamin
Bloomberg, Oct. 15  2008
http://www.bloomberg.com/apps/news?pid=20601070&sid=alhCRwBpIK0U&

Devil Is in Bailout’s Details [5]
Government’s $250 Billion Cash Injection Sparks Welter of Issues
DEBORAH SOLOMON and DAVID ENRICH
WSJ, OCTOBER 15, 2008
http://online.wsj.com/article/SB122398468353632299.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2008/10/new-bailout-price-tag-225-trillion-dollars/

URLs in this post:

[1] Image: http://www.nytimes.com/imagepages/2008/10/15/business/15bailout.graf01.ready.html

[2] $3 trillion: http://abcnews.go.com/Business/Economy/story?id=6022145&page=1

[3] Drama Behind a $250 Billion Banking Deal: http://www.nytimes.com/2008/10/15/business/economy/15bailout.html

[4] Americans Embrace Big Government to Help Solve Market Crisis: http://www.ritholtz.com/blog http://www.bloomberg.com/apps/news?pid=20601070&sid=alhCRwBpIK0U&

[5] Devil Is in Bailout’s Details: http://www.ritholtz.com/blog http://online.wsj.com/article/SB122398468353632299.html

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