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The big news this weekend is Hank Paulson put a $700 billion price tag on a bailout package designed to prevent a financial market crisis from becoming an economic calamity. Paulson's plan would require Congress to raise the U.S. debt limit to $11.3 trillion. Don't forget it was just in July when the debt limit was raised by $800 billion to $10.6 billion as a result of the Housing Bill. On that basis, the cost of the bailouts thus far is $1.5 trillion - and counting. But the newly proposed $700 billion Troubled Assets Relief Program (TARP) "ultimately may not cost us anything - that's certainly the goal," Liz Ann Sonders, chief investment strategist at Charles Schwab says in the accompanying video, echoing Paulson's comments this weekend. Sonders, and others, cite the Resolution Trust Corp. experience in the late 1980s-early 1990s as evidence that the government can possibly turn a profit on this bailout. While that's theoretically possible, "the devil is in the details," she admits.
Originally posted by baseball101
This is just great ... $6K of my money to make up for corporate scums trying to make big paychecks, causing their companies money to vanish, then the mighty government is letting them do it and making us pay for it. Is it really worth it?
P.S. this isn't about the bailout ... just the cost of it for people.
[edit on 22-9-2008 by baseball101]
Originally posted by Rockpuck
reply to post by stander
THIS IS NOT A LOAN.
What will it cost?
This is the key question, and there are no answers yet. The $700 billion figure represents the government's initial outlays for buying bad debt. The ultimate cost will depend on how much the government is able to get for the bad assets it receives. Estimates of the program's cost are all over the map, ranging from taxpayer losses amounting to hundreds of billions of dollars to an actual profit.
"Nobody really knows how this is going to work," said Zachary Karabell, president of the New York economic consulting firm River Twice Research.
Much depends on the price the government pays financial firms for bad assets. If it pays too much, the taxpayers would take a hit and firms would get bailed out more than is necessary to restore the financial system. If the feds pay too little, then lenders remain crippled and unable to do their job of providing credit to the economy.
Originally posted by stander
reply to post by Rockpuck
Well, it's not exactly the investment loan as we know it. I just offered a pillow to sit on a hard rock. I can't no longer find the link that details the terms of the rescue package. If I find it again, I post excerpts.
So you belive that the vacant $300,000 houses lost their value and don't represent any asset?
Originally posted by carewemust
The entire debacle seems to be the fault of incompetent corporate
leadership. Why should we bail them out? Other companies have
filed for bankruptcy, reorganized and started fresh. What's wrong
with letting financial firms take these self-bailout actions, like
United Airlines did?
I mean, any bank that wants to remove toxic assets from its balance sheet can do it at a stroke - just declare them worthless, and poof! they're gone. But of course, that would reduce confidence and capital, not increase it - and that's not what Hank and Ben are talking about. They're talking about turning the assets over to Uncle Sam, and getting cold hard cash in return. And then the question is how much cash they get in return. It's all about the price.