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Posted at 10:01 AM ET, 01/27/2011

What Congress spent to stabilize the financial system in one graph

By Ezra Klein

From the CBO's latest budget outlook (pdf):

finstab.jpg

We basically broke even on TARP and deposit insurance, but backing the mortgage market has cost quite a bit. This graph obviously omits the Federal Reserve's efforts.

By Ezra Klein  | January 27, 2011; 10:01 AM ET
Categories:  Charts and Graphs  
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Comments

--*We basically broke even on TARP and deposit insurance, but backing the mortgage market has cost quite a bit.*--

So, the massive increase in government debt is attributable to Fannie and Freddie, but not the TARP and bank bailouts? Weee ooooo. Something does not compute, Klein.

Posted by: msoja | January 27, 2011 10:54 AM | Report abuse

"What Congress spent" and deposit insurance do not go together. Congress doesn't appropriate any funds to the FDIC, who manages the deposit insurance fund. The fund consists of insurance premiums assessed by the FDIC to the insured banks. The FDIC operates out of that fund, too.

Don't give credit (to Congress) where credit isn't due.

Posted by: christinemccorkle | January 27, 2011 11:27 AM | Report abuse

"What Congress spent" and deposit insurance do not go together. Congress doesn't appropriate any funds to the FDIC, who manages the deposit insurance fund. The fund consists of insurance premiums assessed by the FDIC to the insured banks. The FDIC operates out of that fund, too.

Don't give credit (to Congress) where credit isn't due.

Posted by: christinemccorkle | January 27, 2011 11:29 AM | Report abuse

So what if we broke even on TARP? That program was supposed to take bad assets off the books and get banks lending again; it did neither. Not even close.

If I lend you $100 to fix your car, and you give me $100 a week later without fixing your car, why should I claim the loan was a success?

Posted by: B405 | January 27, 2011 2:03 PM | Report abuse

Check out fannie/freddie. Total bailout to date is about $150 billion -- and rising. Now, recall that CBO projected in July 2008 that any federal (i.e, taxpayer) bailout of fannie/freddie would total about $25 billion. Remember that the next time congressional dems or white house quotes CBO saying that ObamaCare would reduce the deficit by $230 billion over 10 years.

Posted by: HiThere6 | January 27, 2011 4:48 PM | Report abuse

The Fed reports profit and loss statements and pays dividends to the Treasury. They paid about $ 80 billion over the past two years.

The concern is that the Fed lists assets basically at the price it paid for them (it does not markt to market) so the huge gigantic immense reported profits might all (or much more than all) be an illusion.

Personally, I think the Fed's approach makes sense. It has no reason to fear risk, so risky assets are worth more to the Fed than to any other entity (except the US Treasury).

On Fannie and Freddie, the Federal Government has a lot of assets. Unlike the Fed, Fannie and Freddie must mark to market. This means that the numbers behind your graph are *not* the expected effect on the national debt. Income streams are discounted at a high rate to adjust for risk (no other income streams are treated this way). The expected effect of the Fannie Freddie bailout on the national debt in 10 years is much smaller than the sum of the bars you show.

Posted by: rjw88 | January 27, 2011 5:44 PM | Report abuse

Msoja the huge increase in public debt is mostly due to reduced tax revenues due to the recession. If Congress had changed nothing (no tax changes no changes in appropriations from 2007 levels) there would still have been a huge deficit.

Also the stimulus bill increased the deficit. That was the plan. The idea was that deficits cause increased consumption. It worked -- the economy turned on a dime with the most rapid acceleration in GDP growth over 2 quarters and over 3 quarters since Carter was President (that is more dramatic than Reagan's "morning in America" recovery). Sometimes deficits are good.

For example in 2009, 2010 and right now.

Of course, the stimulus bill had nothing to do with the rescue of the financial system.

Posted by: rjw88 | January 27, 2011 5:57 PM | Report abuse

And yet we're still buying bad mortgages. 20% down for government backed mortgages seems reasonable. Why are we taking on more risk at 3.5%?

Posted by: staticvars | January 29, 2011 11:35 AM | Report abuse

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