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Some
numbers are so large they simply become incomprehensible.
Remember when costs of the bailout were projected to be $0.5 Trillion, then
$1 Trillion, then $3 Trillion.
Now, Neil Barofsky, special inspector general for the Treasury’s
Troubled Asset Relief Program says U.S. Rescue May
Reach $23.7 Trillion.
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.
Costs include $2.3 trillion in programs offered by the Federal Deposit
Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and
$7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions,
Veterans Affairs and other federal programs, he said.
Barofsky offered criticism in a separate quarterly report of Treasury’s
implementation of TARP, saying the department has “repeatedly failed to
adopt recommendations” needed to provide transparency and fulfill the
administration’s goal to implement TARP “with the highest degree
of accountability.”
As a result, taxpayers don’t know how TARP recipients are using the
money or the value of the investments, he said in the report.
Banks
Fail to Make Adequate Loan-Loss Provisions
Moody's says Banks Fail to Make
Adequate Loan-Loss Provisions.
Banks
have failed to make adequate provision for the losses on loans and securities
they face before the end of next year, Moody’s Investors Service said.
U.S. banks may incur about $470 billion of losses and writedowns by the end
of 2010, which may cause the banks to be unprofitable in the period, the
ratings company said in a report published today. “Large loan losses
have yet to be recognized in the banking system,” Moody’s said.
“We expect to see rising provisioning needs well into 2010.”
Banks and financial firms worldwide have reported losses and writedowns of
$1.5 trillion since the credit crisis began in 2007, according to data
compiled by Bloomberg. New York-based Citigroup
Inc. has reported $112 billion of writedowns, more than any other firm, the
data show.
“The fundamentals of financial institutions
are still traveling on a downward slope,” Moody’s said.
“No-one should consider recent improvements as assurance that the
current rebound can be sustained.”
Fed's Game is
Delay and Pretend
In spite of writing off $112 billion, Citigroup is still sitting on $800
billion in SIVs, off its balance sheet, not marked to market. What's that
worth? No one really knows and the Fed does not want anyone to find out
either. That is why mark-to-market accounting is still suspended.
Geithner's PPIP also masks price discovery (on purpose) given the public is
on the hook for 93% of the losses. The PPIP encourages speculation (at best),
and at worst is a purposely fraudulent scheme to dump assets on the backs of
taxpayers to benefit bondholders.
The Fed's game is to delay discovery and pretend things are getting better.
Things might be for some assets. In the meantime however, data suggests more
foreclosures, more credit card writeoffs, and more commercial real estate
losses. Is the Fed winning or losing the battle? On the surface, with no
price discovery, it's hard to know. However, if you give any credence to Neil
Barofsky, the Fed may be losing a $23.7 trillion battle.
Mish
GlobalEconomicAnalysis.blogspot.com
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