“The total potential federal government support could reach up to $23.7 trillion.”
-Neil Barofsky

>

Yesterday, we noted that the 23 Trillion dollar bailout was a “WTF number.”

The statement above really turns on your definition of the word “Support” — this is not the actual costs, but more of a measure of the total guarantees, loans, indemnifications and credit extended in all of the bailouts.

Floyd Norris takes it apart — in detail — and reveals more hyberbole than actual expense, noting that number given in Congressional testimony “was vastly overblown.”

Key factors to getting to 23 trillion:

• It includes estimates of the maximum cost of programs that have already been canceled or that never got under way.

• It assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless.

• It assumes that every bank in America fails, with not a single asset worth even a penny.

• And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

• It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.

• Every dollar invested by the government in banks would have to become worthless

• The banks would have to default on securities guaranteed by the F.D.I.C.

• All the collateral posted by the banks to get loans from the Fed would also have to become worthless.

Bottom line: In reality, we are unlikely to get anywhere near that number . . .

>

Source:
Big Estimate, Worth Little, on Bailout
FLOYD NORRIS
NYT, July 20, 2009

http://www.nytimes.com/2009/07/21/business/economy/21bailout.html

Category: Bailouts, Mathematics

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

78 Responses to “Overstating Bailout Costs”