Comments on: $7.8 Trillion Total Bailout Commitment

By: DeDude

DeDude — Wed, 26 Nov 2008 19:28:00 +0000

If the private marked does not want to purchase good consumer loans and good mortgage backed papers, what other alternatives are there than to have the government buy it? Right now investors have become excessively scared so the treasury can borrow 30-year money for less than 4% and everybody else have to pay double digits. It’s a no brainer for government to step in and provide a remedy for the markets current dysfunction. Not doing anything and just letting the market forces do their thing would be as irresponsible as our last dabbling into “total-market-freedom-is-totally-cool” debacle. As long as they take a good enough spread it may even end up giving “we the people” a handsome profit. My biggest concern is that the purchase of F&F papers should have been done to a much higher extent by the treasury not the central bank. I know that we need inflation to get out of this problem in the long run. But if they accelerate inflation too much, how are they going to stop it without inducing stagflation.

By: harold hecuba

harold hecuba — Wed, 26 Nov 2008 19:04:43 +0000

The Six Miracles of Socialism

1. There’s no unemployment, but nobody actually works.

2. No one works, but everyone gets paid.

3. Everyone gets paid, but there’s nothing to buy with the money.

4. No one can buy anything, but everyone owns everything.

5. Everyone owns everything, but no one is satisfied.

6. No one is satisfied, but 99% of the people vote for the system.

~Bennett Owen, National Review in 1990

HT: Anonymous

By: Robertm73

Robertm73 — Wed, 26 Nov 2008 18:50:29 +0000

you can also look at PST and TBT

By: Robertm73

Robertm73 — Wed, 26 Nov 2008 18:48:47 +0000

TXN will allow you short the 10 year treasury.

But be very careful on shorting the treasury bubble it may have long legs.

By: The Curmudgeon

The Curmudgeon — Wed, 26 Nov 2008 16:32:54 +0000

(mhansen: you can short US Treasuries with credit default swaps. Yes, they exist. Check Bloomberg for who sells them.)

It is truly unbelievable how stupid we humans can be. Only twenty years ago, the Berlin Wall, built to keep its citizens in–not, like most walls, to keep an invading army out–fell to the inherent inefficiencies and corruptions of collective ownership of assets. Yet now, our $2 trillion and growing federal reserve balance sheet, our $800 b consumer bail-out, our $700 billion bank bail-out, etc., ad infinitum, conclusively proves that we learnt nothing.

They may have to turn the guns and floodlights around on that border fence w/ Mexico if this keeps up.

By: Winston Munn

Winston Munn — Wed, 26 Nov 2008 16:09:44 +0000

At least our new guy understands the problems….the need of foreign governments to hold U.S. dollars:

“For the same reason, this phenomenon can act to mask or offset the effects of high levels of present and expected future government borrowing on interest rates, perhaps contributing to a false sense of reassurance that we can continue to run large structural deficits without risk of crowding out private investment and damaging future growth.” – Timothy Geithner

The crowding out effect seems evident now. If there is no government guarantee behind it, there is no money for it.

By: Winston Munn

Winston Munn — Wed, 26 Nov 2008 15:51:03 +0000

Don’t forget that the ratings agencies all agree it’s AAA debt – and who can argue with their track record?

By: mhansen

mhansen — Wed, 26 Nov 2008 15:48:26 +0000

Can any one tell me what is the easiest/cheapest way, for an individual investor, to short US Treasury Notes (other than buying puts against IEF)? I’m being serious.

By: RiskAverseAlert

RiskAverseAlert — Wed, 26 Nov 2008 15:02:14 +0000

Rather than “Tracking the Bailout,” this illustration should have been named, “Road Map to the Pending Bankruptcy of the U.S. Treasury.”

By: R. Timm

R. Timm — Wed, 26 Nov 2008 14:40:12 +0000

Barry,

This is another great illustration of the scope of the bailout. The more important question in my mind is what will the actual losses from these investments and loans be to the taxpayer? I don’t know a whole lot about the different assets being purchased here or a realistic expectation of their default rates. My best stab at it is posted below with a total of $412 Billion that the taxpayer will end up shelling out. I could easily be off by > 100%.

Insured Investment (B) Loss Rate % Cost (B)
Citigroup Insured assets 250 30.00% 75
FNM FRE Insured assets 200 10.00% 20
MM Fund insurance 600 0.05% 0.3
FDIC checking account insurance 500 0.05% 0.25
Bear Sterns/ Morgan Stanley 38 50.00% 19
Bank Debt Insurance 1500 5.00% 75

Investor
Commercial Paper 1600 1.00% 16
TARP 70 10.00% 7
FHLB 600 3.00% 18
AIG / C investments 73 50.00% 36.5

Lender
Term Auction Facility 900 1% 9
Other Loans / Discount Window 550 1% 5.5
TALF 200 50% 100
AIG 60 50% 30

TOTAL 411.55