Are you ready for this boys and girls? We knew this was coming…and we are already broke.
Neil Barofsky, is a special inspector general testifying to the House oversight committee tomorrow, (Tuesday 7.21.09), and the prospects are dim considering “they” always lowball the figures.
A series of bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23 trillion, the U.S. government’s watchdog over the effort says – a staggering amount that is nearly double the nation’s entire economic output for a year.
If the feds end up spending that amount, it could be more than the federal government has spent on any effort in American history.
For the government to be on the hook for the total amount, worst-case scenarios would have to come to pass in a variety of federal programs, which is unlikely, says Neil Barofsky, the special inspector general for the government’s financial bailout programs, in testimony prepared for delivery to the House oversight committee Tuesday.
The Treasury Department says less than $2 trillion has been spent so far.
If $2 Trillion has been spent so far, what about the $9 Trillion the Fed’s IG cannot account for?
Still, the enormity of the IG’s projection underscores the size of the economic disaster that hit the nation over the past year and the unprecedented sums mobilized by the federal government under Presidents George W. Bush and Barack Obama to confront it.
In fact, $23 trillion is more than the total cost of all the wars the United States has ever fought, put together. World War II, for example, cost $4.1 trillion in 2008 dollars, according to the Congressional Research Service.
Even the Moon landings and the New Deal didn’t come close to $23 trillion: the Moon shot in 1969 cost an estimated $237 billion in current dollars, and the entire Depression-era Roosevelt relief program came in at $500 billion, according to Jim Bianco of Bianco Research.
The annual gross domestic product of the United States is just over $14 trillion.
Treasury spokesman Andrew Williams downplayed the total amount could ever reach Barofsky’s number.
“The $23.7 trillion estimate generally includes programs at the hypothetical maximum size envisioned when they were established,” Williams said. “It was never likely that all these programs would be ‘maxed out’ at the same time.”
It was also not likely that Americans would lose $1.3 Trillion of their personal wealth in the first quarter of this year, but it happened.
So let’s say the bailouts “only” come to $12 Trillion; aren’t we still using red crayon math?
And then there is this from WSJ:
WASHINGTON — The special inspector general overseeing the $700 billion financial-sector bailout said the Treasury Department isn’t disclosing enough information about how taxpayer money is being spent.
In prepared testimony for a Tuesday hearing of the House Committee on Oversight and Government Reform, Special Inspector General Neil Barofsky said the Treasury has rejected several of his recommendations for more transparency on its part.
Mr. Barofsky also said the Treasury has declined to require bailout recipients to explain what they are doing with their government funds.
Mr. Barofsky is pushing for the Treasury to provide more frequent valuations of a portfolio of assets it has obtained in connection with the TARP. He said the department hasn’t committed to providing such reports more than the once a year required by law.”Treasury’s default position should always be to require more disclosure rather than less and to provide the investors in TARP — the American taxpayers — as much information about what is being done with their money as possible,” Mr. Barofsky will tell lawmakers.
The special inspector general’s office collected its information by surveying 364 institutions that had completed agreements to receive government aid as of Jan. 31. The office didn’t attempt to independently verify the information provided by the institutions, the report said.
The report provides a broad glimpse at how TARP recipients used federal capital. It shows 43% of the banks used the money to meet capital or reserve requirements set by regulators. Four percent used it to complete acquisitions, often in transactions facilitated by the Federal Deposit Insurance Corp. About a quarter reported investing in mortgage-backed securities affiliated with federal housing agencies, and 14% reported using the money to pay down other debt obligations.
The report cited 80% of respondents as using the money in ways that supported their ability to lend. More than 100 institutions said they used the funds to support residential mortgage loans. Sixty-one banks reported using the funds to support other forms of consumer lending.
If all of these institutions are “using the money in ways that supported their ability to lend”, then why is the credit market still frozen? Why are Americans losing their jobs and homes?
And as my spousal unit has stated; Joe Biden saying that we will make $1.50 for every dollar we spend only happens when you are a coke dealer.