The Cost of the Bailout


THE COST OF THE BAILOUT….Here’s a sentence from the Guardian today:

The glut of government initiatives, which included a $326bn bail-out of Citigroup on Monday….

Can we please stop this? Calling this a “$326 billion” bailout is crazy. It’s a $20 billion capital injection plus a bunch of asset guarantees with a maximum cost of $250 billion and a probable cost in the low billions. (Possibly zero, in fact.) The capital will probably be repaid eventually, but even if it isn’t it’s highly unlikely that Uncle Sam is on the hook for more than $30-40 billion.

This stuff has gotten completely out of hand, with “estimates” of the bailout these days ranging from $3 trillion to $7 trillion even though the vast bulk of this sum comes in the form of loan guarantees, lending facilities, and capital injections. The government will almost certainly end up spending a lot of money rescuing the financial system (I wouldn’t be surprised if the final tab comes to $1 trillion over five years, maybe $2 trillion at the outside), but it’s not $7 trillion or anything close to it. People really need to stop throwing around these numbers as if the bailout is comparable to World War II or something. That’s not reality based, folks.

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THE BIG QUESTION...

as we head into 2020 is whether politics and media will be a billionaires’ game, or a playing field where the rest of us have a shot.

Please read our annual column about the state of journalism and Mother Jones' plans for the year ahead, and help us build an alternative to oligarchy by supporting our people-powered journalism with a year-end gift today.

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