Posted by: garispang | June 20, 2009

$12.9 trillion for economic recovery. Where is it?

Here is today’s quiz. If you were given $1,000,000 to spend each day, how many days would it take you to spend $12.2 trillion dollars? You are probably wondering where the number $12.2 trillion came from? Well this is the amount of money the government has committed for economic recovery.

Some of the monies can be accounted for but its still a big mystery where the rest went. So far we know this:

  • The Treasury and the Fed committed $3 trillion dollars to guarantee and buy illiquid assets of some funds to help them meet their obligations.
  • The Federal Reserve is the buyer of last resort for $1.6 trillion dollars of commercial paper.
  • The Treasury and the Fed have committed $1.5 trillion dollars to buy debt and mortgage backed securities from Fannie Mae (NYSE FNM), Freddie Mac (NYSE FRE) and Ginnie Mae.
  • $900 billion dollars is committed for the Term Asset Backed Securities Loan Facility (TALF). The TALF program will provide loans and accept securities backed by consumer and small business loans as collateral.
  • The Treasury has committed $900 billion dollars to seek private investors who will buy nonperforming assets from banks. Both public and private funds will be used in these transactions.
  • We know the $700 billion dollars was spent on the Troubled Asset Relief Program (TARP) to bail out the banks, the auto companies and insurance companies.
  • $400 billion is earmarked for Fannie Mae and Freddie Mac to cover their losses.
  • The Fed has committed $58 billion dollars to cover the losses of AIG.
  • $29 billion dollars was used to buy distressed assets from Bear Stearns and help JP Morgan Chase & Co. buy Bear Stearns.
  • The government spent $4 billion dollars to buy assets from the Reserve U.S. government Fund. This fund is not a government fund buy a private one. Why this fund was bailed out is a mystery.

So now there you have it. You now know where the government will spend $12.2 trillion dollars of your taxpayer money. Isn’t that just dandy? Would you believe that throughout this calamity, just four of our biggest banks control 90% of the derivatives market. They are JP Morgan Chase & Co (NYSE: JPM), Bank of America Corp (NYSE: BAC), Citigroup Inc. (NYSE: C) and Goldman Sachs (NYSE: GS). This is where all the toxic assets are buried. By and large it was rampant speculation and unreasonable leveraging in the derivatives markets that brought our financial house down.

By the way have you figured out the answer to today’s quiz?

Should the Federal Reserve’s spending be reined in?


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