Bailout Total: $29.616 Trillion Dollars

By Barry Ritzholz, The Big Picture Blog

09 December 11

Some readers have expressed confusion about what appears to be a discrepancy in the article between the numbers 29.616 trillion dollars and 29,616.4 billion dollars. Please note the decimal point in one and the comma in the other. There is no discrepancy. The two figures are merely different expressions of the same number, as pointed out in the article. -- CW/RSN

here is a fascinating new study coming out of the Levy Economics Institute of Bard College. Its titled "$29,000,000,000,000: A Detailed Look at the Fed's Bail-out by Funding Facility and Recipient" by James Felkerson. The study looks at the lending, guarantees, facilities and spending of the Federal Reserve.

The researchers took all of the individual transactions across all facilities created to deal with the crisis, to figure out how much the Fed committed as a response to the crisis. This includes direct lending, asset purchases and all other assistance. (It does not include indirect costs such as rising price of goods due to inflation, weak dollar, etc.)

The net total? As of November 10, 2011, it was $29,616.4 billion dollars - (or 29 and a half trillion, if you prefer that nomenclature). Three facilities - CBLS, PDCF, and TAF -  are responsible for the lion’s share - 71.1% of all Federal Reserve assistance ($22,826.8 billion).

One comment about some of the folks pushing back against this massive total: Yes, there is a big difference between a $100 lent for 3 days, and a $100 lent overnight rolled over 2 more times. And there is an enormous difference when temporary overnight lending lasts for three years.

Overnight lending, by its definition, is temporary, short term, lower risk, modest impact. It exists to allow slightly over-extended banks to meet their reserve requirements. But rolling overnight lending repeatedly for 3 years is none of those things. And it makes a mockery of these same reserve requirements, and the protective purposes they are supposed to serve.

The amount of overnight lending reflects how broken our financial system really is. A well capitalized, moderately leverage system does not require this massive liquidity from a central bank - interbank lending should be sufficient. What the data reveals is that the financial sector remains dangerously under-capitalized and overleveraged.

To pretend these were merely minor overnight loans, rolled over once or twice, is foolish, dangerous nonsense.

Cumulative facility totals, in billions

Source: Federal Reserve

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Source:
BERNANKE'S OBFUSCATION CONTINUES: THE FED'S $29 TRILLION BAIL-OUT OF WALL STREET
L. Randall Wray
Economonitor, December 9th, 2011
http://www.economonitor.com/lrwray/2011/12/09/bernanke's-obfuscation-continues-the-fed's-29-trillion-bail-out-of-wall-street/