Posted tagged ‘citigroup’

Profit From TARP? Not So Much

September 7, 2009

Reporter Matt Taibbi sees through the smoke and mirrors surrounding the supposed “profit” taxpayers have made from the Treasury’s TARP program.

004-0123231011-money_burning

It was inevitable that the same people who pushed through the multi-trillion-dollar bailout of Wall Street would come out later on and tell us what a great idea theirs turned out to be, in retrospect and under the light of evidentiary examination. And we’re getting that now, with a pair of reports, the above one in the New York Times and another in the Financial Times, telling us the bailout is working because the government has made some money on TARP. They came to this conclusion by quoting Fed officials, who apparently calculated how much interest the Fed earned on TARP investments above what it would have earned on T-bills. The amount so far, according to these worthy gentlemen: $14 billion.

This is sort of like calculating the returns on a mutual fund by only counting the stocks in the fund that have gone up. Forgetting for a moment that TARP is only slightly relevant in the entire bailout scheme — more on that in a moment — the TARP calculations are a joke, apparently leaving out huge future losses from AIG and Citigroup and others in the red. Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.

…it speaks to a level of intellectual desperation and magical-thinking unusual even for a banker in the subprime/MBS era

Read the rest…

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April Economic Picture

May 4, 2009

Corporate Earnings

First quarter corporate earnings statements were released throughout April. Here are the ones I caught as they were announced:

Losses

3M 1st-quarter profit slips 48%
Altria Group 1Q profit drops, but beats view
AMD posts deeper loss, shares fall
AmEx 1Q profit drops 63 percent
AT&T earnings fall
Boeing posts 50 pct decline in 1Q profit
CAT reports first loss since ’92, cuts forecast
Charles Schwab 1Q earnings fall 29 percent
Chevron 1Q profit falls 64 pct
Coca-Cola 1st-quarter profit falls
ConocoPhillips says profit down 80 percent
Delta posts $794 million 1Q loss
Dow Chemical 1Q profit drops 97 percent
DuPont 1Q profit falls, cuts outlook
EBay 1st-qtr profit, sales fall on weak economy
Exxon profit sinks on slumping oil demand
Gannett 1Q profit tumbles as ad declines deepen
GE Q1 earns fall 36 pct, hurt by finance
Kodak posts wider 1Q loss, suspends dividend
MasterCard 1Q profit falls 18 pct
Mattel posts wider loss in 1st quarter
Merck sees 57 percent drop in first-quarter profit
Morgan Stanley loses $578M in 1st quarter
New York Times posts quarterly loss
Nokia profit plunges 90 percent in Q1
Pfizer profit dips 2 percent, sales fall much more
Procter & Gamble profit falls as consumers cut back
Shell 1Q profit down 62 percent
Sony Ericsson posts loss, to cut 2,000 jobs
Southwest Airlines posts 1Q loss
Time-Warner post 1Q loss
Toshiba expects bigger loss, contract job cuts
UPS 1Q profit plunges more than 55 pct
US Bancorp’s 1Q profit falls, but beats estimates
Whirlpool 1Q profit drops on weakening demand
Yahoo Posts 78% Profit Drop, Cuts Jobs

Gains

Amazon 1Q profit, revenue jump on strong sales
Bank Of America Posts $4.2 Billion Profit
Citi Posts A Profit
Goldman $1.66B 1Q earns beat Wall Street estimates

Google Solid Q1
Humana 1Q profit more than doubles
Microsoft Earnings Weak, But No Disaster
Netflix post solid Q1 sales
Pre-Easter bounce helps lift Hershey 1Q profit
Verizon 1st-qtr profit, revenue beat expectations
Wells Fargo Announces Strong Earnings

Don’t get too excited about those bank profits, though. Bank earnings are actually very weak so far. It’s all just accounting magic, mostly due to the FASB suspension of the mark-to-market rule. Wells Fargo made billions on the mark-to-market change. Goldman’s big numbers are also mostly meaningless.

But don’t take it from me. Here’s former bank regulator and current University of Missouri – Kansas City economics professor William Black:

Banking

Since William Black talked about the stress tests in the above video, let’s start with that topic.

As posted previously, the stress tests are asinine for a number of reasons, not the least being that they are designed by the same geniuses who did not see the housing bubble burst coming. Meaningless as they are, however, they did generate a lot of news in April.

Early in the month we were told that all 19 of the nation’s largest banks passed the stress test. But we couldn’t be certain of that because the Fed ordered all the banks to keep silent about their results.

By the end of April there was a leak. The whisper was that Citi and Bank of America actually failed the stress test and both were being told to raise more capital.

The next day, word was that six banks failed the stress test and now need to raise funds. And now, as of today, Bloomberg is reporting that 14 of the 19 stress tested banks are in trouble.

But there’s nothing to worry about – if you’re a bankster, that is.

The Fed says the 19 companies that hold one-half of the loans in the U.S. banking system won’t be allowed to fail — even if they fared poorly on the stress tests.

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004-0123231011-money_burningA source at Treasury said no banks will close based on stress test results. None, even though Citi needs $10 billion more bailout dollars and Bank of America needs $70 billion more.

After several delays, stress test results will be released Thursday, May 7.

 

Failed Banks

Eight banks were added to the FDIC failed bank list in April, bringing the current total for this year to 29 and surpassing the total of 25 for all of 2008. Also in 2008, only 2 banks had failed by April. This means that bank failures are up more than 1000% this year.

sheilabair-sad_tbi-0_74x0_74With so many banks already seized by the FDIC this year, some are wondering, who’s going to bail out the FDIC?

 

Credit Card Crisis

It was only a matter of time before credit card defaults and other concerns bubbled up to the top of the news.

The Greatest Credit Card Debt Plunge Ever

Consumer credit plunged far faster than expected in February, with Americans taking on far less credit card debt.  Credit card debt fell at an annual rate of $7.8 billion, or 9.7 percent. That is the sharpest drop in dollar terms ever (although the records only go back to 1968.) It’s the  steepest percentage fall since 1978.

Continue reading

Capital One says their current credit card default rate is 8.4% and it is expected to “surge past 10%”.

It should be no surprise that millions of unemployed people are finding it difficult to make their credit card payments. That’s just common sense. And yet, Citibank said higher unemployment won’t lead to credit card losses.

TARP

What was the idea behind the TARP program again? To help banks get back to lending money? So much for that plan. The banks are now lending even less than when the TARP was first launched.

The entire TARP program is becoming very unpopular with the very banks it was supposedly designed to help. Some banks that took (or were forced to take) TARP funds want to pay it back in order to get out from under the government’s thumb. Although Treasury Secretary Geithner doesn’t want the banks to repay TARP, he may not have any legal means to refuse them.

You can’t blame the banks that are healthy enough on their own for wanting to be left alone. Citi has had to go to Treasury to ask permission to pay retention bonuses. The discussion is ongoing.

It’s all about control.

Treasury

geithner3Treasury reported in April that it still has about $110 billion of the original $700 billion bailout fund. Expect that to be used up by the banks that need more capital based on their stress test results.

If the TARP bailout money is almost gone, why is Geithner refusing to let banks pay back the TARP funds they got? Weren’t the taxpayers supposed to be repaid as soon as the banks could manage it?

PPIP

The long-awaited Geithner plan for dealing with legacy securities toxic assets is doing, well, nothing really. Potential investors have shied away, with good reasons. So the deadline for investment applications was extended and the requirements for applicants were loosened.

As of April 29, 2009, Treasury is proud to announce over 100 applications to participate have been received. Wow.

Expanding TARP?

Early in April, Treasury announced it may expand TARP to bail out life insurance companies. It’s a plan scam that helps only bondholders, period.

Fraud?

Say it ain’t so! Neil Barofsky, special inspector general for the TARP, has already launched twenty investigations into possible securities fraud, tax violations, insider trading and other crimes related to the bailout funds.

In the 250-page report Barofsky submitted to Congress he also expressed serious concerns about Treasury’s latest bailout propgram, the PPIP. As Reuter’s blogger Felix Salmon observed, “not only is Barofsky worried about PPIP participants gaming the system, he’s also worried that the whole thing could easily become a front for money launderers”.

Federal Government

000-0404012252Q1 GDP -6.1%.

Budget

Congress passed the $3.5 trillion budget proposed by President Obama, “a level of spending over 10% more than the final year of the Bush administration… [with] almost all of Obama’s wish lists intact.”

President Obama has also asked Congress for a supplemental spending package of $83.4 billion for the wars in Iraq and Afghanistan.

With the largest budget in history passed and two ongoing wars to fund, we learned that the federal budget deficit grew to a record $956.8 billion while federal tax receipts are off 28%.

Revenue

The federal government ran out of cash on Sunday, April 26th, making this the earliest “debt day” ever. With no cash on hand and tax revenue shrinking at an alarming rate, federal borrowing quadrupled.

But the President wants you to know he’s serious about cutting the deficit and spending responsibly. That’s why he ordered his Cabinet to cut $100 million from their combined budgets in the next 90 days. Translated into numbers more like the ones you and I deal with on a daily basis, that’s like cutting “a latte or two out of your annual budget“.

As my dear granny would have said, “oh boy, could you spare it?”

Bailouts

The Congressional Budget Office raised its estimate of what the bailouts will cost taxpayers. As of April 4, the new estimate is $356 billion ($167 billion more than earlier estimates).

Surprise

“And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.” – Sen. Dick Durbin of Illinois

Retail and Commercial Real Estate

3ff5d97338b1d48cMarch retail sales overall fell 1.8 percent. Excluding Wal-Mart, sales fell 5 percent. And Wal-Mart itself saw less of an increase than expected at 1.4 percent in March.

“Strip malls, neighborhood centers and regional malls are losing stores at the fastest pace in at least a decade” and “ghost malls are scaring suburbs“. Commercial real estate defaults quintupled.

The second largest US mall owner, General Growth, declared bankruptcy in April.

On a somwhat related note, office vacancies rose to 12.5 percent in Q1 – the highest they’ve been in three years.

US Auto Industry

Auto sales fell to near 30-year lows in April.

Chrysler

Chrysler

Chrysler made the President happy when it filed for Chapter 11 bankruptcy at the end of April. This means Chrysler will get another $8 billion of taxpayer money to help them “restructure”.

But not everyone is happy with the bankruptcy terms Chrysler proposed.  A group of non-TARP senior hedge fund creditors are fighting to get their clients the settlement they are legally due in a bankruptcy situation. These creditors did not make the President happy.

gm_03181GM

GM will cut 1600 more jobs, force more than 1000 dealerships to close and shut down its plants for most of the summer in order to qualify for more government aid. And indeed, GM received another $2 billion from the Treasury to keep it going another month or so.

GM’s CFO announced that the company will not be making its June 1st debt payment of $1 billion. Instead, they will have “an open debt-for-equity exchange offer for bondholders on June 1”.

Bankruptcy is still a possibility for GM. Preparations are being made for this contingency, with a taxpayer cost $70 billion.

Yet another possibility for GM is a proprosal it made to Treasury that would give the UAW 39% of the company, the federal government 51% and bondholders 10%. Treasury is still mulling the idea over but my bet is that this is how it will go down. A deal that gives the government and a major labor union ownership of the company will be much to enticing for Geithner and Obama to pass up.

fordFord

Meanwhile, Ford is quietly making due without government money, capturing 16 percent of a severly limited car market in March, thanks primarily to its hybrid vehicle, Fusion.

So while Ford is still losing money as most automakers are in this economy, Ford’s stock shares were up in April.

I’m keeping my fingers crossed for Ford. If they can survive this crisis without taking any taxpayer money they will be heroes in my book.

Housing and Personal Finance

Housing

house_ablazeForeclosures were up 24% in Q1. More than 10% of recent FHA loans are delinquent. Even prime mortgage losses are exceeding expectations, at least for JP Morgan.

Housing prices continue to decline according to the Case Shiller Home Price Release for March 2009. Take a look at Mish’s excellent analysis here.

The government’s mortgage modification program seems to be doing little or nothing which should be no surprise to anyone who looked at the details of that program.

Personal Finances

Consumer Prices Suffer First Annual Decline Since 1955, yet consumer spending still fell for the first time in three months, down 0.2%. Americans are re-learning thrift, it seems.

Bankruptcies are still rising, both business and individual. 130, 831 bankruptcy cases were filed in March 2009 – an increase of 46% over March 2008 and an 81% increase over March 2007.

And somehow, in spite of all the bad news surrounding them, consumer confidence rose in April to its highest level since last November. Huh?? My guess is that the average consumer has been watching the Dow and taking it as an indication of the economy’s general health. That and Bernanke’s “green shoots” along with Barack Obama’s “glimmers of hope”.

Having watched the stock market and other economic news much more closely over the past six months than ever before in my life, I can tell you that gauging the nation’s economic health by the stock market is stupid. Wall Street is completely disconnected from reality.

Unemployment

souplineUnemployment rose again in all US metro areas in March. Continued claims remain at an all-time record, 6.27 million.

The government’s official unemployment rate is now at 8.5% but in reality it is now 15.6%.

Unemployment figures combined with housing reports points to an extended period of recession still ahead of us.

Last Words

Trying to figure out what’s happening in the economy and what is ahead is a difficult proposition, perhaps even impossible. A New York Times reporter went to a number of conferences and talks and wrote about the conflicting information he heard – all based on the same data.

Nobel prize winning economist Joseph Stiglitz has blunt criticism of the Obama administration’s economic programs so far. Read the eye-opening Bloomberg interview here.

And finally, just to keep things real, have a look at “The Top 10 Signs You are Living in a Banana Republic“.

February Economic Picture

March 1, 2009

Lots of economic news in February 2009, so let’s look at it in several categories.

Federal Government

News about federal government spending came at a head-spinning pace in February, with enough twists and turns to satisfy the most intense rollercoaster fans.

Feb 17: Obama signs $787 billion stimulus bill

Feb 18: Some GOP Governors Consider Refusing Stimulus Money

Feb 19: Obama announces Housing Bailout at $275 Billion

Feb 19: CNBC’s Rick Santelli wants to have a tea party

Feb 23: Obama convenes a “Fiscal Responsibility Summit”, says it’s time to clamp down on federal expenditures

Feb 24: Obama addresses joint session of Congress, says he intends to cut deficits in half over the next four years

Feb 25: House OKs $410B spending

Feb 26: Obama unveils his first budget –  $1.75 trillion deficit for the 2009 fiscal year

There are problems with Obama’s budget – for one, it depends on revenue by 2012 from carbon emission trading, a program that does not yet exist.

It also expects 3.2% growth in GDP next year, an enormous increase given the most recent figures of a 6.2 percent decline in the last quarter of 2008.

And Obama’s plan to raisetaxes on the wealthiest 2% of taxpayers to pay for his expensive domestic agenda is more wishful thinking. According to this Wall Street Journal editorial, he could take everything they earn, and it still won’t be enough.

Obama’s budget: huge ambitions, huge obstacles.

The Fed

 Federal Reserve Chairman Ben Bernanke testified before the Senate Committee on Banking, Housing and Urban Affairs on February 24, 2009.

He was asked by Senator Evan Bayh what he thought about the anger brewing among people who feel the federal government’s “housing rescue plan” is unfair.

Bernanke responded with the “your neighbor’s house is burning but it’s his fault” analogy. “You could punish him by refusing to send the fire dept and then he would learn his lesson, but unfortunately in the process you’d have the entire neighborhood burning down,” said Bernanke.

Read more…

There is a big flaw in Helicopter Ben’s analogy. We, the neighbors of this careless person who started a fire, have already paid our taxes to have a fire department. Calling 911 to have the fire put out should not entail any additional expense. In the meantime, my neighbors and I could be hosing down our own houses to prevent them catching fire.

What Mr. Bernanke and the federal government are proposing is that we buy a whole fleet of new fire engines, build a couple of new fire stations, then hire and train new firefighters while our neighborhood goes up in flames.

 But Helicopter Ben has no problem bailing out bad borrowers. The moral hazard does not matter, in his opinion.

He’s also confident he can prevent runaway inflation even though the Fed has dramatically increased the money supply in response to this crisis correction. Why do I not feel even the tiniest bit reassured?

Treasury

zombies_aheadLots of talk in February about nationalization of banks, particularly Citigroup. Even though Senate Majority Leader Harry Reid insists “It’s not nationalization” , Treasury Secretary Tim Geitner gave Citi another $25 Billion of taxpayer money in exchange for “preferred stock”. Timmy paid Citi $3.25 a share for these stocks – the same stocks that are selling on Wall Street for $1.50 a share (Dow closing Feb. 27, 2009). Nice terms if you can get ’em.

But that’s not likely to be the end of it. Citi still faces enormous new losses and investors are not reassured by this latest infusion from the TARP. Citigroup may become the next AIG   (watch for AIG to come begging again in the first days of March).

Mike Shedlock (aka “Mish”) has a good analysis of the Government – Citigroup dealings here.

Treasury also announced that it has provided $429 million to 29 banks in the latest batch of investments under the TARP. Details available here.

Bank of America’s balance sheet doesn’t look good – loans are valued at $44.6 billion less than what its balance sheet says, according to the bank’s annual report released Feb 27 and the losses BofA incurred with their purchase of Merrill Lynch are worse than they thought – about $500 million worse.

Fannie Mae reported a sixth straight quarter of losses – $25.2 billion in Q4 2008.

Fannie Mae (FNM, Fortune 500) had said it would need up to $16 billion to cover its fourth quarter losses. Freddie Mac (FRE, Fortune 500), which has accessed nearly $14 billion and has said it may need up to $35 billion more, should report its results in coming weeks. The companies need the funding because their liabilities exceed their assets, giving them a negative net worth.

Read more

 FDIC

On the last FDIC Friday in February, regulators closed two more banks, bringing the total of failed banks for 2009 to 16.

The good news is that the rate of failures per week seems to have slowed down a bit. The bad news is that the FDIC’s list of troubled banks has grown to its highest level since 1994.

CNNMoney reported that bank failures may cost the FDIC $80 billion. That’s a predicted $65 billion in bank failures between 2009 and 2013 added to the $18 billion cost of 2008 failures.

Stock Market

 February was another losing month for Wall Street. Stocks ended the month at 12-year lows and if you look at the percentages, the decline in stocks has already hit Great Depression levels – a 50+ percent decline from the beginning of the crash.

Also worth noting that it isn’t just the financial stocks that are losing ground anymore. The downward trend is spreading to manufacturers and makers of basic consumer goods.

Finally, to be filed under “a picture is worth a thousand words”, the latest update to the “Four Bad Bears” graph (the grey line is the Great Depression, the blue line is the current recession:

Read the details and view the larger version of the graph here.

Retail

Expect more store closings and layoffs. Reports that came out in February from major retailers show huge 4th quarter losses:

Home Depot reports 4th-quarter loss of $54M

Lowe’s 4Q profit falls 60 percent

J.C. Penney reports 51 percent slide in 4Q profit

Sears 4Q profit falls 55 percent on charges

Macy’s reports 59 percent drop in 4Q profit

Saks Fifth Avenue – $98.75 million 4Q Loss

Gap: Sales & Earnings Down, Stores to Close

Office Depot posts $1.54 billion loss for 4Q

Department stores are unlikely to recover this year. Their primary goal is more likely to be avoiding bankruptcy and having to go out of business completely. On a personal note, I sure hope J.C. Penney survives – it’s one of my favorite stores for affordable, quality merchandise.

Other Economic News

U.S. GDP fell off a cliff in Q4 2008.

The contraction for the fourth quarter of 2008 had been estimated at 3.8 percent just a month ago. Then the Commerce Department raised it to an astonishing 6.2 percent Friday — the largest revision since the government started keeping records in 1976.

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The decline of 6.2 percent is the worst decline since the depths of the 1982 recession.

Consumer confidence fell to a new low in February.

The New York-based Conference Board said its Consumer Confidence Index, which was down slightly in January, plummeted more than 12 points in February to 25, from the revised 37.4 last month. That was well below the 35.5 level that economists surveyed by Thomson Reuters expected.

The index, which had hovered in the high 30s over the past few months, broke new lows since it began in 1967. A year ago, the consumer confidence reading stood at 76.4.

Read more

Even Warren Buffett says the economy will be ‘in shambles’ for 2009.

It’s not just that Americans are losing confidence in the economy, they’re scared about where the nation is headed.

Seventy-three percent of those questioned in a CNN/Opinion Research Corporation survey released Monday say they’re very or somewhat scared about the way things are going in the United States. That’s six points higher than in an October poll.

Read more

February Charts from Calculated Risk

Here are a few that stood out for me. See the full report and all the charts at the Calculated Risk blog.

January Employment Report

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 598,00 in January, and the annual revision reduced employment by another 311,000 in 2008. The economy has lost almost 2.5 million jobs over the last 5 months!

The unemployment rate rose to 7.6 percent; the highest level since June 1992.

Year over year employment is now strongly negative (there were 3.5 million fewer Americans employed in Jan 2008 than in Jan 2007).

 

January Retail Sales

This graph shows the year-over-year change in nominal and real retail sales since 1993.

Although the Census Bureau reported that nominal retail sales decreased 10.6% year-over-year (retail and food services decreased 9.7%), real retail sales declined by 10.9% (on a YoY basis). The YoY change decreased slightly from last month.

 

January Capacity Utilization

The Federal Reserve reported that industrial production fell 1.8 percent in January, and output in January was 10.0% below January 2008. The capacity utilization rate for total industry fell to 72.0%, the lowest level since 1983.

The significant decline in capacity utilization suggests less investment in non-residential structures for some time.

 

Vehicle Miles driven in December

This graph shows the annual change in the rolling 12 month average of U.S. vehicles miles driven. Note: the rolling 12 month average is used to remove noise and seasonality.

By this measure, vehicle miles driven are off 3.6% Year-over-year (YoY); the decline in miles driven is worse than during the early ’70s and 1979-1980 oil crisis. As the DOT noted, miles driven in December 2008 were 1.6% less than December 2007, so the YoY change in the rolling average may start to increase.

 

Case Shiller House Prices for December

This graph shows the nominal Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 28.3% from the peak.

The Composite 20 index is off 27.0% from the peak.

 

Unemployment Claims

This graph shows weekly claims and continued claims since 1971.

The four week moving average is at 639,000 the highest since 1982.

Continued claims are now at 5.11 million – another new record (not adjusted for population) – above the previous all time peak of 4.71 million in 1982.

Wrapping Up

Here’s one bit of good news after all the bad – gold is getting close to $1000 per troy ounce. Silver is also on the rise again.

That’s a lot to absorb for one short month so I’ll close with this a little music.

First, the classic “Sixteen Tons” performed by Tennessee Ernie Ford.

And finally, Jimmy Buffett performing his new song “A Lot To Drink About”

Citigroup’s New Luxury Jet

January 27, 2009

Bailed Out Citigroup Buying a $50 Million Luxury Jet

Beleaguered Citigroup is upgrading its mile-high club with a brand-new $50 million corporate jet – only this time, it’s the taxpayers who are getting screwed.

Even though the bank’s stock is as cheap as a gallon of gas and it’s burning through a $45 billion taxpayer-funded rescue, the airhead execs pushed through the purchase of a new Dassault Falcon 7X, according to a source familiar with the deal.

Continue reading…

How much more of this are we going to take?

Speaking of Ponzi Schemes…

January 7, 2009

CNNMoney.com reports that the cost of federal bailouts to date plus estimated costs for Barack Obama’s economic stimulus plan may total near $8 trillion.

The $8 Trillion Bailout

Many details of Obama’s rescue plan remain uncertain. But it’s likely to cost at least $700 billion — and that would push Uncle Sam’s bailouts near $8 trillion.

Sitting down? It’s time to tally up the federal government’s bailout tab.

There was $29 billion for Bear Stearns, $345 billion for Citigroup. The Federal Reserve put up $600 billion to guarantee money market deposits and has aggressively driven down interest rates to essentially zero.

The list goes on and on. All told, Congress, the Treasury Department, the Federal Reserve and other agencies have taken dozens of steps to prop up the economy.

Total price tag so far: $7.2 trillion in investment and loans. That puts a lot of taxpayer money at risk. Now comes President-elect Barack Obama’s economic stimulus plan, some details of which were made public on Monday. The tally is getting awfully close to $8 trillion.

Obama’s plan would combine tax cuts with infrastructure job creation efforts. Economists say it could serve as an integral piece to the government’s remaining economic recovery puzzle.

“This plan will be the first direct tool to make additions to disposable income,” said Lyle Gramley, an economist with Stanford Group and former Fed governor. “None of the other efforts have done that directly.”

Continue reading…

For one thing, I will be very surprised if the Obama regime will be able to limit its stimulus spending to less than $1 trillion in its first 100 days.

And, more importantly, all of this conveniently ignores the fact that all efforts to “stimulate” and “stabilize” the economy are doing the same things that caused the problems in the first place – easy credit and excessive spending without savings.

Don’t listen to the mainstream media. Repeat after me – it’s not a crisis, it’s a correction. Efforts to prevent an economic correction only prolong and wosen the pain.

$7.76 Trillion (so far) to Rescue the Financial System

November 26, 2008

From Bloomberg News:

U.S. Pledges Top $7.7 Trillion to Ease Frozen Credit

 

Nov. 24 (Bloomberg) — 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 after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

Continue reading… 

Interesting quotes from the above article…

“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.

‘Some have asked us to reveal the names of the banks that are borrowing, how much they are borrowing, what collateral they are posting,’ Bernanke said Nov. 18 to the House Financial Services Committee. ‘We think that’s counterproductive.’ “

So it would be counterproductive to tell the American people where their money is going? That sounds rather elitist, Ben. Actually, it sounds quite a lot like taxation without representation…