The Key Numbers Behind the Bailouts

JON HILSENRATH / Wall Street Journal 13dec2008

Another day, another bailout.

Keeping score on government bailouts has become a nettlesome task. Using the most expansive counting possible, the U.S. has pledged to spend, invest or loan as much as $10 trillion to backstop or bailout banks, money-market funds, depositors and many others. Yet the final tab is likely to be much, much smaller.

Consider the Federal Reserve's pledge to backstop a $1.3 trillion piece of the commercial-paper market by buying this short-term corporate debt itself. So far it has invested $312 billion in the program; Fed officials expect to get all that back with interest. It is only taking the paper of high-rated companies and has different forms of security.

Do you count the $1.3 trillion market it has pledged to backstop, the $312 billion it has thus far invested, or nothing at all because it expects to get its money back? Defining the parameters of a count is also tricky. Do you count the $168 billion fiscal stimulus package that had come and gone before the September blowup in financial markets?

Here's a quick guide to some very big numbers behind the bailouts:

FEDERAL RESERVE: Since early August 2007, the Fed's balance sheet has grown from $851 billion to $2.245 trillion as it has created rescue programs such as the commercial-paper facility. In addition, it has drawn down its stockpile of safe Treasury securities from $791 billion to $476 billion to finance programs and lent out $185 billion of Treasury securities to Wall Street firms in exchange for riskier securities.

In all, the central bank has already committed about $1.9 trillion to support financial markets through programs including commercial-paper lending, rescues of Bear Stearns and American International Group Inc., lending to banks, as well as other steps. The number could grow as programs are implemented in the weeks ahead.

Though the Fed has written down $2 billion on loans to Bear Stearns, Fed officials consider its programs to be well-secured. It is also earning interest and fees.

Since the collapse of Lehman Brothers, the Fed has turned over $6.6 billion in earnings to the Treasury, according to estimates by Louis Crandall, an economist with Wrightson ICAP LLC, a bond-market research firm. That's down a bit from $7.8 billion during the same stretch last year.

In short, the Fed is potentially sitting on more risk and earning what look like modest returns to go with it.

TREASURY: The Treasury has so far committed $335 billion of its Troubled Asset Relief Program for a variety of efforts -- pumping capital into banks, bailing out AIG and Citigroup Inc. and developing a program with the Fed to support consumer lending. Separately, it has invested $14 billion in Freddie Mac, the mortgage-finance firm that was effectively nationalized by the government in September, and purchased $49 billion in mortgage-backed securities to support Freddie and Fannie Mae, the other mortgage firm under government stewardship.

All together, that's $398 billion invested by the Treasury so far. The Treasury is also sure to tap another $350 billion available to the TARP through funds approved by Congress in October. It expects to get it all back with interest. But that is no sure thing.

HUD: The Department of Housing and Urban Development has pledged to commit $300 billion to help homeowners avoid foreclosure. The program, called Hope for Homeowners, allows banks to move borrowers into government-insured loans if lenders agree to write down a portion of the principal. The program has gone through revisions since it was launched in October and so far it has used very little of the money.

BROADER PLEDGES: Adding together rescue money already explicitly committed by the Treasury and Fed brings the dollars spent, loaned or invested to date to $2.3 trillion, a number that is sure to grow and doesn't count fiscal stimulus.

The numbers get much larger when one considers the size of some markets the government has pledged to support. The Treasury has a program to backstop $3 trillion worth of money-market mutual funds. (It hasn't had to tap any funds so far to honor that commitment and has reaped about $800 million in fees on it.)

The Federal Deposit Insurance Corp. is in line to guarantee as much as $700 billion worth of bank debt, according to FDIC estimates. It has also substantially expanded bank-deposit insurance. The Fed is standing behind $1.3 trillion in commercial paper. Various agencies are helping Citigroup to backstop $306 billion in investments.

It's anybody's guess what will ultimately be gained or lost. If the economy stabilizes, it could be a big money winner for taxpayers. If the recession deepens and the markets don't heal, the losses one day could get very large.

source: 12dec2008

Participants in Government Investment Plan

December 10, 2008

In unveiling its bank-share purchase program, the Treasury Department required nine of the nation's largest financial-services companies to sell a total of $125 billion in preferred stock to the government, and said an additional $125 billion in stock could be bought from other firms on a voluntary basis. Below, see a list of participating companies.    Last updated: 12/10/2008