Bailouts: Where's all this cash coming from?

A couple hundred billion here and a couple hundred billion there. What's a few billion between friends? The government is spending hundreds of billions of dollars to sustain banks, AIG and the big mortgage aggregators, Fannie Mae and Freddy Mac. Is it really clear what we're buying as taxpayers? The money's being used to buy "toxic assets" but there is no clarity about what prices we're paying for subprime mortgages or other assets from banks to keep them solvent.
Citigroup's pricetag for a bailout grew by another $20 billion from the original $25 billion. The government also agreed to shoulder another $300 billion in losses from bad assets. How did Citigroup and the government come up with this figure? Do they just pull these numbers out of a hat? As a taxpayer, do I really want to own a business whose mismanagement makes GM look like a beacon of efficiency? Would it make more sense for the government to pay $30 billion to acquire all of Citigroup and close its doors? Taxpayers might be better off given the rising price tag for this mess.

Barry Ritholtz, who writes "The Big Picture" blog and is an investment strategist for Fusion IQ, says the bailout pricetag now exceeds $4.6 trillion. It is more than the combined cost of the Marshall Plan, NASA, the New Deal, the Louisiana Purchase, the Korean and Vietnam Wars, and the Iraq invasion. Bloomberg did some calculations and said the overall package is over $7 trillion. In other words, this is $24,000 for every American. I think the economy would have been a lot better off if The Fed and the Treasury just cut each person the checks. A $96,000 check for my household would eliminate my debts, pay a few years of tuition at a state college for my daughter and still leave enough for me to buy a car (effectively helping Detroit's autoworkers). Is that any less worthwhile than giving it to some poorly managed banks?

Instead, the Federal Reserve and the Treasury are keeping the printing press going and for no certain benefit, for ill defined objectives and for assets that do not have a clear market value. Our economy will be that like a South American banana republic when this is all done. We'll be begging the Chinese to lend our government more money and the dollar won't be worth much of anything. To top it off, President Bush and his Treasury Secretary have been absent in terms of providing leadership during this economic crisis. Could we just accelerate the Obama inauguration and evict Bush from 1600 Pennsylvania Ave?

Don't bail out the carmakers: The Economist

Politicians, business and the unions all want a bail-out of Ford and General Motors. That would be a mistake. Chapter 11 was made for situations like this. As article says: Bailing out Detroit would be a bad use of public money. It would be bad in principle, because it would be an open invitation to companies everywhere to apply for aid to survive the recession. Banks qualify for help because the entire economy depends upon their services. They are vulnerable to sudden collapses in confidence that can spread to other banks that are perfectly solvent. A good car company does not face the same threat. And although Detroit employs a network of suppliers, which would suffer if production shuts down, nothing would sap a recovery and job-creating enterprise like locking up badly used resources in poorly performing companies.

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