U.S. Pledges $7.7 Trillion… WTF?

by Azreel | November 24th, 2008

What? We’re On the Hook for HOW much? That little $700 billion bailout that Congress approved in the TARP bailout is in reality just the beginning of a $7.7 Trillion gift from you, the US taxpayer, to the banking industry.

The US Taxpayer’s early X-Mas gift to banking industry (Bloomberg.com)

The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system. Emphasis mine.

That’s right boys and girls. Banks screw up, and you get to foot the bill. The New Deal looks tiny by comparison. But really, just how much are we spending here? The article puts things in perspective:

The money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages. Emphasis mine.

We’re giving the banks enough money to pay off half the mortgages in the US, the purported cause of the problem, but foreclosure rates are still less than 2% even in the worst affected areas of the country. Where then is all of this money going?  This number includes not only the $700 billion that the congress approved to prevent the collapse of AIG and other thrifts, but also FDIC bank insurance payouts as well as FHA guarantees for Freddie and Fannie.  That doesn’t include any potential bailout for the US auto industry.  And don’t forget the little noticed Treasury rule change that will give banks an enormous tax break by allowing them to deduct losses from other banks that they acquire, thereby reducing any remaining tax revenues from these same institutions that are receiving so much aid.

Once we started down this path, we committed ourselves to even more spending in the future.  How much more will be spent in a vain attempt to rescue the financial industry?  Mark my words, this $7.7 trillion is just the beginning of this downward spiral.

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