I'm entirely confused. Can someone please explain the current economic situation going on in the US right now?Here is what I know:
The Feds have given out more than $600 billion in the past year — to bail out, or help bail out, some of the biggest names in American finance.
On Wednesday, the central bank took the unprecedented step of asking the Treasury Department to sell debt on behalf of the Fed. The first of those auctions raised $40 billion, and two more to raise an additional $60 billion are scheduled for Thursday.
Stimulus checks totaling $168 billion, sent to Americans earlier this year to bolster the economy, will have an impact on the budget deficit. For the budget year ending Sept. 30, it's expected to hit $400 billion, the second highest on record and more than double last year's deficit of $161.5 billion.
The Bush administration is projecting that the deficit for the new budget year, which begins Oct. 1, will surge to an all-time high of $482 billion. And that estimate doesn't include any costs for bailing out Fannie and Freddie ~$200 billion dollars.
(Info attributed to Martin Crutsinger- Economics Writer)
Here is what baffles me:
The Feds just paid $89 billion to save AIG's ass, and now own 79.9 % of the company. So are they opening the door to having all the debts gone bad to the Fed's, actually the US taxpayers, who now own 79.9%, the same amount in liability???
$600 billion in the last few months
$400 billion budget deficit 9/30/08
Next year's deficit will be $482 + $200 billion in bail out $, SO FAR
Plus the National debt $9.6 trillion
The Iraq war $$$ is not actually in the budget? $554 billion
When I look at these numbers, I come up with *bankrupt*.
Maybe some mathematician, or magician can explain it to me, please!
I just have to coin a phrase here.... this seems like "Fuzzy Math" a term used in the debates by one George W. Bush
7 comments:
I'm sure GWB really wanted to postpone all this for the next prez. Just another sign of his incompetence that it all crashed a little earlier than he'd planned. Not a good omen for The Bush Legacy.
You bring up an excellent point about AIG! I never thought about WHO might be ultimately on the hook for all those insurance claims AIG is sure to have right away for IKE damage (hattip to Engima for connecting that dot). You just knew W would take care of Texas, as long as it doesn't cost him or his fatcat friends anything.
ps, love your new header and avatar!
I was at first very pissed with all this bail out nonsense. Two considerations have come to my attention though that make me want more information before I condemn them out of hand.
The first is that these bail outs usually come in the form of loans and have a very good history of being paid back in full with interest. Which puts the American taxpayer on the hook only if the loans are not paid back.
The other is, and specifically considering AIG, that allowing AIG to falter and go belly up would have created way more havoc in the financial markets than doing what the FED did.
I am no expert. I just know that by now, it is wise to look at both sides to see if this might not have been making the best of a very bad situation.
I have no pity for the jerks at the top who created this mess. But to allow it all to go down without at least some kind of fight seems a bit like biting off our nose to spite our face.
I feel it was the "deregulatory" mentality of the Bush Administration and his party that created this and many of the past Wall Street excesses going back into the 1980s. But what we don't need are knee jerk solutions that seem so popular when Congress is responding to panic. Stop gap measures right now may give us the breathing room to come up with sensible solutions for the long haul.
dk~ It seemed weird to me that the government took 79.9% of the stock/ownership of a tanking company. It's one thing to give a bail out loan, it's another to essentially buy part of it, knowing they hold the securities in a market that is tanking. As more jobs are lost, not only are the variable rate loans going to go bad, but people in previously stable fixed rate loans (such as Lehman employees & HP employees) can't make house payments. Add in the natural disaster cost in Texas & you are back at square one, or even worse in the hole.
It does not make sense to own the liability???
MM: I hear what you are saying, but the part that baffles me is, since when is the US government responsible for private company bail outs? $600 BILLION just flew out the door in a very short period of time-AND it's not like the government coffers were in good order to begin with. We have a huge debt-$9.6 trillion, and from what I understand, we are borrowing $ from China to pay for the war (a hidden debt?). In real life, if someone asks you for money & you don't have it, you have to say No.
It seems to me these huge bail outs are only going to make the FDIC coffers run dry sooner than later, AND it is the corporations they are bailing out, not the people. So while AIG may get saved, those with foreclosing mortgages, vanishing pensions, and disappearing 401k & bank accounts will not be given the safety net.
The Bush philosophy- The economy, ignore it & it will go away is turning into a historic man made disaster. These huge bailouts to private companies
are going to take the system down even faster.
My preference would be, if a company got sloppy or greedy with junk mortgage loans, let them take their hits, and bail out the people who would then become homeless- by rewriting their loans into something they can afford.
Bailing out those corporations that screwed up & buying into their liability seems double whammy stupid.
Hmm! Makes me wonder if the next headline will be something about buying a bridge (to nowhere) in Alaska?
I would love to see someone reposess the White House. The sooner the better.
It just occurs to me that all these kneejerks who keep screaming that the govt should not be in the health insurance biz (calling it socialized medicine & obviously not wanting any part of socialization, ever never) .... that thanks to this deal making us all stockholders in AIG, the govt now find itself in the insurance biz. You just know it's coming ... that day in the very near future when they realize they've bought a ton of liability, the repubs will wake up & scream we should not be in the insurance biz. All this deal has done is kicked the can down the road.
Many residential insurance companies went bankrupt in Calif after the Northbridge earthquake (they break themselves up into separate companies state-by-state in order to limit liability). I can only imagine a big commercial insurer like AIG's exposure to liability for all the commercial and business damage in Houston, which is mostly big oil/energy corporations and their financial enablers -- jeez, do you think that's it? Once again Bush-Cheney protects big oil? so predictable ...
ps, I don't know why but since you put up the new header, I keep getting asked to verify your blog, which I do, but then every few moments, I keep getting asked again. maybe it's just my computer, but it's not happening to me on other blogs. kinda destroys my train of thought (such as it is).
Hey Diva A WH foreclosure would be sweet.
DK- I checked AIG's website, they do residential ins as well, so I bet Texas claims are going to hit hard..... or in the teeny tiny fine print, the policies must omit natural disaster or acts of god.
Sorry your house looks like pick up sticks, it's just not covered under your insurance.
The only thing I can figure is I am posting from a different computer & maybe you just need to refresh your link to my blog addy?
That is as much techno wisdom as I have to share.
Good luck & let me know if that fixed the problem.
The Scabber has a pretty good post up at Reconstitution tonight explaining what the numbers add up to for you and me. Check it out.
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