Holy Cow Batman! SIGTARP Barofsky says U.S. on the hook for $23.7 Trillion in bail out!

Update: The actual testimony is here, SIGTARP Barofsky Testimony and attached to this post.

As massive and as important as TARP is on its own, it is just one part of a much broader Federal Government effort to stabilize and support the financial system. 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.

In the nine months since the Emergency Economic Stabilization Act of 2008 (“EESA”) authorized creation of the Troubled Asset Relief Program (“TARP”), the U.S. Department of the Treasury (“Treasury”) has created 12 separate programs involving Government and private funds of up to almost $3 trillion. From programs involving large capital infusions into hundreds of banks and other financial institutions, to a mortgage modification program designed to modify millions of mortgages, to public-private partnerships using tens of billions of taxpayer dollars to purchase “toxic” assets from banks, TARP has evolved into a program of unprecedented scope, scale, and complexity.

Yes, are you standing in horror? $23.7 trillion dollars. Supposedly this is what is in SIGTARP, the inspector general of TARP funds is going to say. @&*)$@ that will break the United States. I don't know how else to put it.

I will assume this is total exposure, commitments and not actual real costs (that's like saying a never ending black hole bucket to have $23.7 trillion dollars).

Wall Street Journal:

Mr. Barofsky also estimated the government's potential exposure to programs aimed at fixing the financial crisis at $23.7 trillion. To get to that figure, Mr. Barofsky combined direct spending with all the government guarantees and programs and assumed the "gross exposure" the government could face if all the programs were tapped to their fullest potential. "These numbers may have some overlap, and have not been evaluated to provide an estimate of likely net costs to the taxpayer," his report noted.

Bloomberg:

U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.

The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.

“TARP has evolved into a program of unprecedented scope, scale and complexity,” Barofsky said in testimony prepared for a hearing tomorrow before the House Committee on Oversight and Government Reform.

The actual report, to be presented to the House Committee on Oversight and Government Reform, was covered (and the original report is attached) in SIGTARP July 20th Report - What are Financial Institutions Doing with the Dough? in which we noted the U.S. Treasury is stone walling on any audit or oversight of TARP and other funds.

The Wall Street Journal made the testimony document public. It appears the actual Congressional hearing is tomorrow. With news like this, leaked, pre-released, we will be covering the hearing for assuredly sparks are gonna fly. Wow!

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Title change

It's supposed to be "Holy (insert here), Batman!"
Usually it was "Holy Cow, Batman!"
As a fan of that cheesy old TV series, I felt I had to point that out.

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last I heard was $12 Trillion

which was bad enough, but tell me we do not need an audit of the Fed....this is across the board, all agencies and it's horrifying. I'm sure we'll hear more details tomorrow but it's like a maze of disaster in numerous, uncoordinated programs doling out absurd amounts of cash!

I'd say SIGTARP just plain aren't messing around and good for him, someone has to pipe up and this is his job (to audit the bail out, TARP along with COP), but that must be terrifying to go before Congress tomorrow with this level of news.

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$14T according to the

BEA

Not entirely OT, I had an opportunity over the weekend to speak extensively with a former WS insider. I asked this person to provide thoughts of the Fed Reserve oversight. The response was "The Fed couldn't maintain the lending standard requirements 2005-2007. When an entity cannot manage responsibilities it currently has, it makes no sense to add more responsibility."

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Wow. We can spend much of that $23 billion

bailing out the financial oligarchy. But balk at spending money on providing health care coverage to 43 million Americans. That is sad and pathetic.

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Is that a typo?

Before I get my underpants all in a twist, I wonder if someone who perhaps wrote that document shifted a digit to the right (or is it left?) when they read it. Anyway, in the report on page 3 is a table. At the bottom of that table is a row labeled "total", and the figures are said to be in billiions of dollars.

Total | | $2,365.0 – $2,865.0 | $699.0

Is someone writing the report misreading 2.3-2.8 Trillion as 23-28 trillion?

Hey, it's still an unimaginably large figure to me, but maybe this HUGE figure of $27T is just a typo made out 10x larger than the table says it is?

Does anyone else see that, or am I misreading the table?

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unfortunately not

the total you are reading is just US Treasury funds (TARP) and associated programs.

That's $3 trillion. Separately the Fed. committed about $12 trillion in loans, additional programs, then there are homeowners programs, FDIC, SEC, etc.

I lost track myself at the Fed tally of $12 trillion so this was a shock to me too.

You can create an account if you want to discuss. I will try to write up some details from tomorrow's hearing to try to find out some factual tally.

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Holy integrity! You know what this means????

Yup, it means there exists, against all odds, at least one HONEST inspector general in the United States' government. This is truly monumnetal, epic and conceivably gnarly.

Normally, I don't waste my valuable time on the likes of Newsweek, Time, The Economist, or any other media stuff which I am unable to verify (SHOW ME THE DATA! as an old prof use to yell at us.), but the other day, while getting a haircut, I happened to peruse an older copy of Newsweek, and a completely nonsensical column (pure tripe) by Robert J. Samuelson, who couldn't comprehend a wit of economics if it bit him in the posterior, caught my eye.

Samuelson made the fallacious claim that unless we (always that imperious we) rescued the financial sector, the economy would stay depressed. Of course, anyone with at least two neurons to rub together understands that this financial sector is the cause, the major vector, of this situation. Samuelson should go back and reread (or probably just read for the first time) Jean-Baptiste Say, along with Henry George, Thorstein Veblen, and John Kenneth Galbraith, of course! (The financial sector doesn't create jobs - it simply robs the rest of us via securitization and derivatives, leveraged buyouts based upon securitized derivatives, and jobs offshoring.)

Samuelson mentioned that while the bankers may be "inept" we shouldn't be completely averse to them (or words to that effect). Now these "inept bankers" walked away with billions, and the banks are technically insolvent - so I wonder where all the money went???

(Insert "Things that make you go hmmmmmmmmmmm..." here)

Obviously, to judicious-thinking people, the way to pay for single payer/universal healthcare is simple: Paulson, Rubin, Greenberg, Cayne, Crittendon, Summers, Geithner, Dimon, Peterson, Schwarzmann, Kravis, and on and on and on.

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An overstated number

The NY Times breaks down that number and it looks a lot less imposing.

“The total potential federal government support could reach up to $23.7 trillion,” he stated.

But in the report accompanying his testimony, Mr. Barofsky conceded the number was vastly overblown. It includes estimates of the maximum cost of programs that have already been canceled or that never got under way.

It also assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.

You almost get the feeling that they fed the public that number, so when the real number comes out the very next day that people will say, "Whew! The problem isn't nearly as bad as I thought."
When in fact, $4.7 Trillion is a catastrophe of unprecedented amounts.

The federal government has devoted $4.7 trillion to help the financial sector through its crisis, a level of assistance equal to about one-third of the overall U.S. economy, a watchdog report said Monday.

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I'm waiting on video

but have a new blog post coming up to sum up. Your comment is almost identical to what I'm saying, "overinflated number", so what? infinity divided by 12 is still infinity.

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