Bailouts could cost U.S. $23 trillion
Politico
By EAMON JAVERS
| 7/20/09 3:19 PM EDT
On Foz News the figure
of 14.8 Trillion was given out at the exact figure that has
been spent thus far on the Wall Street and Bank Bailouts as related to the
housing bubble. Congressman Ron Paul is attempting to get an
accounting from the Fed as to where all this money has gone. The suspicion is that there has been major
corruption in the Fed as it answers to no one.
A series of bailouts,
bank rescues and other economic lifelines could end up costing the federal
government as much as $23 trillion, the
If the feds end up spending
that amount, it could be more than the federal government has spent on any single 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.
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
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
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.”
Still, the
eye-popping price tag provoked an immediate reaction on Capitol Hill. “The
potential financial commitment the American taxpayers could be responsible for
is of a size and scope that isn’t even imaginable,” said Rep. Darrell Issa
(R-Calif.), the ranking member of the House Oversight Committee. “If you spent
a million dollars a day going back to the birth of Christ, that wouldn’t even
come close to just one trillion dollars – $23.7 trillion is a staggering
figure.”
Congressional
Democrats say they will call for Treasury to meet transparency requirements
suggested by the inspector general, said a spokeswoman for the Oversight
committee. “The American people need to know what’s going on with their money,”
said committee spokeswoman Jenny Rosenberg.
In his prepared
remarks, Barofsky writes: “Since the onset of the financial crisis in 2007, the
Federal Government, through many agencies, has implemented dozens of programs
that are broadly designed to support the economy and financial system. The
total potential Federal Government support could reach up to $23.7 trillion.”
The comment comes in
the context of a quarterly report to Congress by the special inspector
general. Barofsky will testify Tuesday before the House Committee on Oversight
and Government Reform. The office of the special inspector general was created
to serve as an auditor of the federal bailout by the same legislation that
launched the TARP program itself.
Originally, TARP was
intended, Barofsky writes, to facilitate “the purchase, management, and sale of
up to $700 billion of “toxic” assets, primarily troubled mortgages
and
mortgage-backed securities.”
But that plan was
soon rejected, and the TARP instead became a grab bag of bailout initiatives,
including bailouts for GM, Chrysler and auto parts suppliers as the federal
government struggled in real time to contain a spiraling economic disaster.
Barofsky reports that
TARP has come to include 12 separate programs that include a total of as much
as $3 trillion, “including TARP funds, loans and guarantees from other agencies, and private
money.” Of the initial $700 billion allocated by Congress, Barofsky found that
the Treasury has so far announced how $643.1 billion will be spent, and it has
actually spent $441 billion as of June 30.
Barofsky’s
calculation of a $23 trillion figure took into account a wide-ranging group of
federal programs set up by disparate agencies within the federal bureaucracy.
The special inspector
general counted approximately 50 initiatives or programs launched since 2007 to
fight the economic collapse.
The Federal Reserve,
he found, has increased its balance sheet from $900 billion to more than $2
trillion, and Barofsky estimated that the total amount of support to the
economy by the fed is at least $6.8 trillion, because it is exposed to
significant losses if many of the assets guaranteed by the Fed deteriorate in
value.
The FDIC, Barofsky
writes, has contributed $2 trillion in “new gross potential support.”
The Federal Housing
Finance Agency – “under whose auspices fall the Government Sponsored
Enterprises such as Fannie Mae [and] Freddie Mac,” – has effectively provided
more than $6 trillion in gross potential support.
Treasury itself,
Barofsky concludes, has contributed nearly $4 trillion of potential support to
the economy beyond the TARP program itself.
And Barofsky points
out the at the non-TARP programs, which are far larger than the TARP itself, do
not come with the strings that the high-profile TARP money itself comes with,
including executive compensation, and they don’t necessarily require
congressional approval. And beyond the ability to tally their costs, Barofsky
has no authority as an auditor over the non-TARP programs.
The hearing before
the House Oversight Committee will be held at 10:00 a.m. Tuesday in room 2154
Abby Phillip
contributed to this story.