Saturday, September 13, 2014


For a host of reasons most Americans have given up on tracking how much money the American taxpayer was put on the hook for after the market collapsed in 2008. I have not. 

This Monday, September 15, marks the 6 year anniversary of our inglorious market crash.

Since the 2008 market collapse the federal government - i.e. the American taxpayer - has bailed out Wall Street and backstopped the market bets of our nation's biggest financial players. From providing low interest loans (0.75%), to backstopping market insurance programs, and by purchasing Wall Street's toxic assets, the American government (led by the Federal Reserve) has committed a little over $14 trillion to America's largest financial institutions.

Throw in the more than $1.5 trillion made available through President Bush's TARP and President Obama's stimulus package and we're talking about $16 trillion (give or take a few hundred billion dollars). Then we have the fact that America's middle class saw lives ruined  as its wealth collapse by 40 percent after 2008.

But this isn't about Main Street. It's about Wall Street.

To give you an idea of the scale behind the Mother of All Bailouts, the entire U.S. economy is expected to produce $16.8 trillion worth of goods and services in 2014 (and only produced about $14.4 trillion in 2008).

If you're looking for a functional equivalent of what we handed Wall Street that's easy to understand, imagine your bank offering to loan you the amount of your entire salary for the year at 0.75 percent interest. Now imagine your bank also agreeing to accept the full value that you paid for your house in 2007 (say, $500,000) as collateral when the value of your house today is only 60 percent ($300,000) of what you paid for it.

This is effectively what we offered Wall Street after the market collapsed in 2008. We gave them almost free money, and took crap for collateral. Nice.

So, where did all the money go? Seriously, after raining trillions on Wall Street and the financial sector, why hasn't any of the wealth trickled down to the rest of us?

The wealth hasn't trickled down for two reasons. First, the money's gone to our pampered and protected banks, who are using a variety of ways to hoard cash. As well, the money has effectively been stashed away as credits and guarantees for Wall Street's next industry induced market collapse. I have two inserts below that show who's hoarding (Wall Street and the Too Big To Fail banks) and stashing (the Federal Reserve and Treasury Department) our money.

The first tells us who are the recipients of the various government loan programs. It's from the GAO's 2011 audit of the Federal Reserves bailout costs, which was released July 11, 2011 (p. 131 in the audit report, 144 on your screen as you scroll).

Loans made to financial institutions via assorted government programs (in billions of dollars).

Because the loan programs were viewed as insufficient to deal with the totality of Wall Street's market mess the Federal Reserve and the U.S. Treasury Department are also offering an alphabet soup list of financial programs that pretty much guarantee the market bets of our nation's biggest financial firms will pay off.

Below are two area charts of the individual programs that were made available by the Federal Reserve and the Treasury Department. They add up to more than $14.2 trillion. Coupled with the more than $1.5 trillion that Presidents Bush and Obama coughed up - via the bailout (2008) and stimulus (2009) programs - and we're looking at almost $16 trillion (again, just about the value of all the goods & services we'll produce this year).

In 2011 the NY Times did a break down of these programs and their costs, which you can access here. A description of each program can be found in the appendix section of the GAO's audit (p.p. 148-242).

The point is that if there's one thing we shouldn't forget it's that the American taxpayer is footing the bill for Wall Street's foolishness, and their epic financial gains. Unfortunately, the complexity of it all is one of the reasons why we don't pay much attention to the damage.

In fact, I would say that we've forgotten all about it. Because we're patriots.

Sigh ...

- Mark 

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