Bailout Costs Taxpayers Even More Money

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Bailout funds to fix the economy come at a higher cost to U.S. taxpayers.

Originally, the Congressional Budget Office had projected that last year’s $700 billion Troubled Asset Relief Program (TARP) would cost taxpayers $189 billion. With the new budget thrown in for 2009 and 2010, this figure has risen to $356 billion. (Reuters)

The Treasury Department has announced plans to use some of the money to help avoid home foreclosures and made new deals with Bank of America and the notorious American International Group (AIG).

On April 3, 2009, the Office of Management and Budget (OMB) published Implementing Guidance for the American Recovery and Reinvestment Act of 2009 (“Recovery Act”). This is the second installment of detailed government-wide guidance for carrying out programs and activities enacted in the Recovery Act. Read April 3 detailed guidance memorandum.

1 thought on “Bailout Costs Taxpayers Even More Money”

  1. An Easily Understandable Explanation of Derivative Markets

    Heidi is the proprietor of a bar in Sydney . She realizes that
    virtually all of her customers are unemployed alcoholics and, as such,
    can no longer afford to patronize her bar. To solve this problem, she
    comes up with a new marketing plan that allows her customers to drink
    now, but pay later. She keeps track of the drinks consumed in a ledger
    (thereby granting the customers loans).

    Word gets around about Heidi’s “drink now, pay later” marketing
    strategy and, as a result, increasing numbers of customers flood into
    Heidi’s bar. Soon she has the largest sales volume for any bar in
    Sydney .

    By providing her customers freedom from immediate payment demands,
    Heidi gets no resistance when, at regular intervals, she substantially
    increases her prices for wine and beer, the most consumed beverages.
    Consequently, Heidi’s gross sales volume increases massively.

    A young and dynamic Vice President at the local bank recognizes that
    these customer debts constitute valuable future assets, and increases
    Heidi’s borrowing limit. He sees no reason for any undue concern, since
    he has the debts of the unemployed alcoholics as collateral.

    At the bank’s corporate headquarters, expert traders transform these
    customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These
    securities are then bundled and traded on international security
    markets. Naive investors don’t really understand that the securities
    being sold to them as AAA secured bonds are really the debts of
    unemployed alcoholics.

    Nevertheless, the bond prices continuously climb, and the securities
    soon become the hottest-selling items for some of the nation’s leading
    brokerage houses.

    One day, even though the bond prices are still climbing, a risk manager
    at the original local bank decides that the time has come to demand
    payment on the debts incurred by the drinkers at Heidi’s bar. He so
    informs Heidi.

    Heidi then demands payment from her alcoholic patrons, but being
    unemployed alcoholics they cannot pay back their drinking debts. Since
    Heidi cannot fulfill her loan obligations, she is forced into
    bankruptcy. The bar closes and the eleven employees lose their jobs.

    Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%.
    The collapsed bond asset value destroys the banks liquidity and
    prevents it from issuing new loans, thus freezing credit and economic
    activity in the community.

    The suppliers of Heidi’s bar had granted her generous payment
    extensions and had invested their firms’ pension funds in the various
    BOND securities. They find they are now faced with not only having to
    write off her bad debt but also with losing over 90% of the presumed
    value of the bonds. Her wine supplier claims bankruptcy, closing the
    doors on a family business that had endured for three generations, and
    her beer supplier is taken over by a competitor, who immediately closes
    the local plant and lays off 150 workers.

    Fortunately though, the bank, the brokerage houses and their respective
    executives are saved and bailed out by a multi-billion dollar,
    no-strings attached cash infusion from their cronies in Government. The
    funds required for this bailout are obtained by new taxes levied on
    employed, middle-class, non-drinkers who have never been in Heidi’s

    Now you understand!!!
    unknown author

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