What the 2008 bailouts really cost

I had some extra time today so I decided to take a look at what has happened this year. I wanted to go back and take a look at the various buyouts and bailouts that the Government has backed, and the promises made so far. And the numbers are horrendous.

The main focus so far is on the $1.5 trillion that has been authorized and/or spent thus far. $700 billion for the bailout of mortgages and the credit crunch, and now another $800 billion for mortgages and consumer loans. But those numbers are not the full amount of cost this year.

The year started with the bailout of Bear Stearns. It cost $29 billion to allow JPMorgan to buy that failed brokerage house. And we were promised that would fix everything. Then there was the $150 billion stimulus package that was promised to fix the sagging economy, which failed. Then came Fannie Mae and Freddie Mac, which Representative Barney Frank publicly pronounced as healthy and secure, that cost $120 billion each (not including the $600 billion that is now part of the $800 billion bailout package). And the numbers are still not done.

AIG cost $120 billion by itself. That though was said to be included in the $700 billion authorized by Congress. That means of the 1/2 of the funds given to Treasury Secretary Paulson only $230 billion was available for everything else needed. Not counting the tens of billions given to banks, or the money spent to buy bad loans at unknown valuations.

Of course there was also Citigroup. This cost $20 billion plus $306 billion for guarantees of their bad loans, for a total of $326 billion. Now that is a problem because if the funds came out of the same pool as AIG, we are in a bigger negative than the spending is already creating. A double negative of sorts. And yes I know that guarantees are not the same as cash, but a guarantee must be backed by something besides words. Which means cash from somewhere.

But let us not forget the $25 billion given to the auto industry. And that has nothing to do with the additional $25 billion that is being asked for now, just roughly 5 weeks later. Which is separate money. And that precedent is going to lead to the requests of the airline, credit card, home building/construction and other industries. If the Government is handing out money to businesses, it would be folly not to get in the line.

So the total is $1.94 trillion dollars. Which does not include Citigroup or the additional amounts from the auto industry. Including that figure we get $2.27 trillion in money that never existed and must be repaid. To be exact that means that every American, each of the 300 million citizens, owes $7,567 to the Government.

It is expected that some of these loans and stock purchases will eventually break-even or turn a profit. The expectation is that will happen in 10 - 15 years. Though it is absolutely unclear how the public will be repaid, though the Government will collect all the money. Thus it is possible that the Government will receive money from the public and hold repayments from loans - effectively being paid twice. And it is very likely that any repayment will be funneled into Government agencies instead of the public, as was attempted by Democrats with the first version of the mortgage bailout bill.

But even if 40% of the loans were to make a 50% profit, the bulk of the debt incurred will still be greater. And that does not cover the direct cash infusions made without a loan or repayment provision - which is about 70% of all the funds so far as I can gather.

And the fun does not end there. Remember that President-elect Obama, pushed by House Speaker Nancy Pelosi, has promised a now $700 billion second stimulus plan. The exact details of this plan are unclear, but some amount will be given to the public and some will be used to fund public works. Or so the loose plans state so far. That would mean that in 1 year the cost is $2.97 trillion.

And President-elect Obama still is pushing to add over $800 billion in new spending for new and/or expanded programs. That makes it $3.77 trillion. Or in terms of cost to you and I - $12,567. That's for every man, woman, and child alive right now - working or not.

Put in different terms, this money could have completely funded the entire NASA budget (roughly $419 billion unadjusted for inflation) since inception nearly 10 times over. We could have funded 1,000 moon landings ($36 billion unadjusted) including all the research and development.

Let me make it more personal. That amount is more than the entire net worth of Oprah Winfrey, Bob Johnson, Tiger Woods, Michael Jordan, Tom Cruise, Bill Gates, George Soros, and Warren Buffett combined and multiplied by 10. It's enough money that every single American citizen, of any age, could go to the average college for 2 years. It's enough money to give every American alive today a 10% down-payment on a $120,000 house.

And there is no guarantee, in fact there is reason to highly doubt, that it will get better.

The Black middle-class is not better than 5 years ago

I am troubled. I could not sleep having read the numbers and thought of the implications they held. The severity of them stands out, with a stark foreboding nature. And I think you will agree.

The numbers I speak of come from USAToday, and the Pew Research Center. Simply stated, African American kids are more likely to make less than their parents. Specifically this is what was found for middle-class Blacks, a group of individuals that is incredibly small and decreasing every day. In that group 70% of the children made less money than their parents, while virtually 70% of White children of middle-class parents made more. And if you are wondering, this is from October 2007 hardly ancient times.

What this implies is very straight forward. Life as an African American is about to get much more difficult rather than better. And this is the situation when there are more Blacks involved with government, business, and entertainment than perhaps ever in the history of the United States. Is it any surprise that when asked 56% of Blacks see things getting worse, or that Whites asked the same question had the same percentage (56%) saw the future for Blacks improving.

I can hardly imagine a more problematic situation for the nation. On one end we have the very real perception that fewer are doing better held by African Americans, and the other is a cheerful belief that life is getting better held by Whites. Is there any wonder that so many question why there is such an uproar when events like Genarlow Wilson, Megan Williams, or the Jena 6 occur? Blacks see things becoming more like the 1950’s and Whites see a hoped for future envisioned in the late 1960’s.

The window dressing looks fantastic. Figureheads like Tiger Woods, Michael Jordan, Denzel Washington, Bill Cosby and Senator Barack Obama are making strides that my grand-parents could only dream of. Yet, fewer children stand a chance of gaining even a portion of such success in their adulthood. And that means strife. And strife inevitably equates to violence.

The question arises why this is happening. Some will say it’s the fact that Blacks fail to be involved in their community. Others claim it’s a lack of education. There is the question of the loss of the 2 parent family, and the impact of major media promoting base, generally illegal, violent aspects of culture. I believe they are all factors to different degrees.

Given that, why would Whites have an entirely opposite belief of what the current status is? Thinking about it, and speaking with a friend that is in a mixed marriage, I would say that it’s because of the figureheads they see. Because Senator Obama is running for President, and Condoleezza Rice is Secretary of State, and the apparent opulence of a few, very visible entertainers (mostly rappers in this case) the impression is that things must be better in general as 20 or 30 years ago you did not see this. That of course is the assumption of thinking what you see in one is common for all.

While there are dramatically more African Americans in politics today (elected office or in the executive branch) there is no difference in injustices in the legal system (as I am aware). 30 years ago a Black man would get sentenced harsher than a White for the same crime, and violence against a White virtually guaranteed a life sentence or the death penalty. That has not changed. In the 1990’s Rodney King was viciously beaten by cops that were acquitted, last year Sean Bell and 3 Black men were shot (he was killed) multiple times by 5 police officers without cause (no viable proof was ever provided to my knowledge). There is no difference.

Yet many might point to the success of OJ Simpson as an example of the correction in the balance of the law. And I would have to counter that for over a decade he has been hounded by the media with the carefully worded accusation of guilty ever since. And there are the examples I cited earlier, which are a mere handful of cases that show a consistent trend in the media and legal system.

Continued in part 2...