Tim BuchholzPosted Nov 26, 2008 •Permalink • Printer-Friendly Version
Can They Do That?
By Tim Buchholz
Well, it started with $700 billion. Actually, it started before that with the Fed helping Chase take over Bear Sterns, and then saving AIG, and then … well, you were there. But let’s get back to $700 billion. Under what some say were threats of “Marshall Law,” our government approved $700 billion taxpayer dollars (or future taxpayer dollars) to buy up bad mortgage assets off these struggling bank’s books, and we were going to get the money back when the housing slump ended and the mortgages were resold. Then, Paulson decided that the money would be better served given as direct infusions to the banks, buying up stock (which could be bought back later) and thus giving the banks the capital needed to start loaning again. Didn’t Congress approve that money for buying bad assets? I’m not saying I like that idea any better, but isn’t that what our representatives voted for? Of course, the banks aren’t really using the money the way they were supposed to, and some are even using it to buy other banks, but we can’t put too many restrictions on the money, or the bailout won’t work, says Paulson.
So far Paulson has spent half of it, as well as two trillion in loans that he will not say who they went to, because too many restrictions will make the bailout fail. The next $350 billion has to be asked for and approved, and some say Paulson wants to save it for the next administration to take a swat at the problem. Then I read today from AP Economics writer Martin Crutsinger that Paulson is going to be using an additional $600 billion to, again, buy mortgage assets, good ones this time according to NPR, not the subprime ones. I thought they had changed their minds on that one, and if they spent $350 billion of what had been approved for this action, and can’t use the other $350 billion without approval, where did they find another $600 billion, without a big vote on Capitol Hill and campaigns being called off? Crutsinger says, “The Fed said it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. It also will purchase another $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.”
He goes on to say that the Fed is also releasing a program for the next phase of this crisis, the credit card, student loan and auto loan companies. Only $200 Billion will be needed for this crisis, for now. As Bush said about the rebailout of AIG, it may not be the last.
So, that’s $800 Billion the Fed and Treasury got without having to have a vote, when it took two weeks and more pork than my wife’s lasagna to get $700 Billion? (Tax breaks for wooden arrows and NASCAR, to name a couple). What’s happening here? Where is this money supposed to come from? Richard C. Gross in The Washington Times says, “The $200 billion plus $600 billion to boost mortgage lending will come from money created by the Federal Reserve.” So, they can just create $800 Billion out of thin air? We’re saved then, right? But wait, doesn’t somebody eventually have to pay this money back?
I’m holding on for dear life here, trying my best to believe in my elected officials, but they are not making it easy. So today, the Federal Reserve created an additional $800 billion and added it to our National Debt, which according to http://www.brillig.com/debt_clock/ is, get ready, $10,658,127,246,511.06. Remember when Bush first came into office and it was around $3 trillion? Just 8 years ago? And for those of you thinking it’s going to get better under Obama, just take a look at his appointments so far, including the head of the Fed in New York City, Timothy Geithner, as his Secretary of Treasury. This is one of the guys who just “created” $800 Billion, remember? Obama has already said it’s going to get worse before it gets better. I’m just beginning to wonder if it ever will really become better for us, “Main Street,” as they like to call us. Just ask yourself who profits when we increase our debt (we are paying interest on it, folks), and you’ll start to feel as sick to your stomach as I do.
There is a great breakdown of the events in this crisis, http://biz.yahoo.com/ap/081125/meltdown_actions_so_far.html?.v=2
Tim Buchholz is a freelance writer living in Ohio