Thursday, September 18, 2008

Fed Serves Leftover Crow to US Taxpayers and Dollar Holders Everywhere

In the previous post, Edgy described some of the methods used by the Fed over the last year to inject money into the US market. As of today, open market operations, TAFs, and TIOs totalled about $340 billion dollars. Much of this debt was borrowed with mortgages and other risky junk for collateral. That's like getting a loan from your bank and promising to give them your garbage if you can't (or don't want to) repay the loan! For comparison, the annual US budget deficit is projected to be $410 billion for 2008, and the total federal debt is about $10 trillion.

But wait, there's more!

In March, the Fed extended about $30 billion in credit to JP Morgan to help them buy out the failing Bear Stearns. Then the Fed stepped in to bail out Fannie Mae and Freddie Mac. It's hard to know how much it will cost us taxpayers to secure their debt; estimates range from tens of billions to trillions of dollars! On September 14th, the government said it would preserve free market principles (for once) and would not step in to bail out Lehman, prompting Barney Frank (Democrat Congressman) to declare September 15th "Free Market Day." Unfortunately, Free Market Day only comes once a year. The next day, the Fed ponied up $85 billion to bail out insurer AIG. This prompted Jim Bunning (Republican senator) to compare the Fed to Hugo Chavez's practice of nationalizing Venezuelan companies.

As of tonight, the market has rallied on hints that Treasury Secretary Paulson will announce a plan to have the government take over all the other problems on Wall Street, at taxpayer expense. Edgy expects to see Bernanke flying over NYC on a giant rainbow tomorrow morning, dropping warm cookies for everyone to enjoy. And President Bush will be hosting fireside chats every Monday evening.