Tuesday, October 07, 2008

The 17 Thousand Pound Gorilla

BAILOUT TYPE & COST (Source: Reuters)
Wall Street bailout package approved this week: up to $700 billion
Bear Stearns financing: $29 billion
Fannie Mae and Freddie Mac nationalization: $200 billion
AIG loan and nationalization: $85 billion
Federal Housing Administration housing rescue bill: $300 billion
Mortgage community grants: $4 billion
JPMorgan Chase repayments: $87 billion
Loans to banks via Fed's Term Auction Facility: $200 billion+
Loans from the Exchange Stabilization Fund: $50 billion
Purchases of securities by Fannie Mae and Freddie Mac: $144 billion
POSSIBLE TOTAL: $1.8trillion+

NUMBER OF HOUSEHOLDS PER U.S. CENSUS :
105,480,101

POSSIBLE COST PER HOUSEHOLD:
$17,064+


The $700 billion was never going to be enough and both the Regime and its capitalist collaborators knew it, but it was important to get the hook in to insure future introductions to Mo' Money. Foreknowledge of this situation explains Monday's 800 point drop in the Dow index and its global ripples. The conspirators used fear tactics to stampede the ignorant and venal in Congress to pass an ill-conceived plan just as they did to get authorization to wage aggressive war for oil in Iraq. The Wall Street Relief Plan, as it might more properly be called, does nothing to support the deflating real estate market which is the underlying real asset beneath the mountains of bad paper created by the finance alchemists. Just because the federal government bails out the banks does not mean an end to the bear market in real estate. The real estate market will recover when the excess inventory has been cleared and real estate prices again make investment sense. What the plan does do is create such a massive amount of new public debt that it endangers our country's credit rating. The possibility of ruinous hyperinflation is not far away. Meanwhile the credit squeeze continues unabated as capital flees to safe havens--for now--like T bills, bidding down the discount.