CNBC: Bailout may cost half a trillion dollars
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More tonight on the Bush administration’s plan to attack the financial crisis with what The New York Times says ‘could be the biggest bailout in United States history.’ Readers of L.A. Land are suggesting other names for it, my current favorite being ‘Bailie Mae.’
CNBC.com, which first reported talks for a RTC-like bailout of banks and financial firms, floats the half-trillion price estimate (it would look like this on a check: $500,000,000,000.00):
The proposal to create a massive facility to buy mortgage-backed securities could cost as much as a half-trillion dollars and would involve the purchase of both private-label and government-guaranteed mortgages, according to an administration official.
The New York Times reports on a plan for a ‘vast bailout’:
While details remain to be worked out, the plan is likely to authorize the government to buy distressed mortgages at deep discounts from banks and other institutions. The proposal could result in the most direct commitment of taxpayer funds so far in the financial crisis that Fed and Treasury officials say is the worst they have ever seen.
There is more, or rather, there will likely be more -- The New York Times reports Democrats may push to include additional spending beyond the massive bailout itself:
Democrats, having their own desire for a second round of economic aid for struggling Americans, see the administration’s request as a way to win White House approval of new spending to help stimulate the economy in exchange for support for the Treasury request. Democrats also say they will push for relief for homeowners faced with foreclosure in return for supporting any broad bailout of struggling financial institutions.
The Wall Street Journal characterizes the bailout as a ‘plan to buy bad assets from banks’:
The federal government is working on a sweeping series of programs that would represent perhaps the biggest intervention in financial markets since the 1930s, embracing the need for a comprehensive approach to the financial crisis after a series of ad hoc rescues.
At the center of the potential plan is a mechanism that would take bad assets off the balance sheets of financial companies, said people familiar with the matter, a device that echoes similar moves taken in past financial crises. The size of the entity could reach hundreds of billions of dollars, one person said.
Questions tonight: Will Sen. Obama support the ultimate agreement? Will Sen. McCain? Will it face serious opposition in Congress?
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-- Peter Viles