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April 6th, 2009

The Bailout Tab Is Rising for Taxpayers

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Critics of large government spending have long argued that the increased dollar count accumulates mainly into a burdensome future financial obligation. According to estimates from the Congressional Budget Office (CBO), we’re about to get the first taste of our mounting obligation.

The CBO estimates that taxpayers will have to pay $167 billion more than expected for the nation’s laundry list of bailouts. The tab will increase $152 billion for this year and $15 billion for 2010:

The CBO raised its projection because yields have increased on securities issued by the bailed-out financial institutions under the $700 billion Troubled Asset Relief Program.

That means there will be an increase in the cost of the subsidy from the U.S. Treasury’s purchase of preferred stock, asset guarantees and loans to automakers, the CBO said.

That taxpayers’ tally could rise even more thanks to new bailouts announced after the CBO’s original cost estimate. Bailouts announced for Bank of America (BofA), AIG, and Fannie and Freddie are expected to do so:

[The BofA and AIG] deals will be at rates higher than the averages in the CBO’s original estimate. Also going up: the subsidy rates in the administration’s $50 billion program to deal with home foreclosures.

The TARP program isn’t the only one that will prove more costly to taxpayers than originally thought, says the CBO.

Bailing out Fannie Mae and Freddie Mac — the two mortgage finance giants taken over by the government in September — will cost another $52 billion this year alone, and an additional $28 billion for their activities from 2010 to 2019, says the CBO.

Washington continues to stand financially committed to the financial, housing, and automotive sectors. Don’t be surprised if the CBO’s estimate rises again with their next report.

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One Response to “The Bailout Tab Is Rising for Taxpayers”

  1. Hal Says: April 6th, 2009 at 1:50 pm

    I read this and I this morning I saw this artice:
    FDIC Watch: Agency’s Insurance Commitments 34% Higher than Reported

    http://seekingalpha.com/article/129626-fdic-watch-agency-s-insurance-commitments-34-higher-than-reported?source=email#comment-453423

    and I can’t help but think that the US is in for a world of hurt.

    I think the bet thing for the average American to do is to clear out as much of their debt as possible and put some savings away. Maybe even invest in some gold and silver too.

    I’ve been watching the precious metal markets with the free widget ExactPrice http://www.learcapital.com/exactprice and both those metals are falling into some good price ranges I think for buying.

    Whatever happens, it doesn’t look to me like we’re going to be able to avoid some big time inflation.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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