So far, the government has taken these steps to interfere in the marketplace and prevent necessary market corrections (to the tune of $7 trillion):
SAVING WALL STREET
Term-auction facility: $1.6 trillion in loans to banks so far in exchange for otherwise unwanted collateral. The Fed increased its monthly auction limit to $300 billion in October, up from $20 billion when the Fed began the program.
Dollar swap lines: Unlimited dollars to 13 foreign central banks to provide liquidity to foreign financial institutions. The Fed lifted its cap after raising it to $620 billion in October from $24 billion in December.
Bear Stearns: $29 billion in a special lending facility to guarantee potential losses on its portfolio. With the lending facility, JPMorgan was able to step in to save Bear from bankruptcy.
Lending to banks: $70 billion lent on average every day to investment banks, after facility opened to non-commercial banks for first time in March. $92 billion a day to commercial banks.
Cash injections: $250 billion allocated to banks from $700 billion rescue package in exchange for equity stake in the financial institutions in the form of senior preferred shares.
Citigroup: $300 billion in troubled asset guarantees and $45 billion in cash-injections to prevent fourth-largest bank from failing.
Fed rate cuts: Down to 1% in October 2008, from 5.25% in September 2007.
SAVING MAIN STREET
Stimulus checks: $100 billion in stimulus checks made their way to 140 million tax filers to boost consumer spending and help grow the economy.
Unemployment benefits: $8 billion toward an expansion of unemployment benefits, to 39 weeks from 26 weeks. Some states must now offer 39-week benefits after an extension act was passed in November.
Bank takeovers: $15.5 billion drawn down so far from the FDIC's deposit insurance fund after 22 bank failures in 2008.
Rehab foreclosed homes: $4 billion to states and municipalities in assistance to buy up and rehabilitate foreclosed properties.
Student loan guarantees: $9 billion so far in government purchases of student loans from private lenders. Higher borrowing costs made student loans unprofitable for a number of lenders, many of whom stopped issuing the loans.
Money-market guarantees: $50 billion in insurance for money-market funds. The Fed then began to lend an unlimited amount of money to finance banks' purchases of debt from money-market funds. The Fed then agreed to purchase up to $69 billion in money-market debt directly. In October, the Fed said it would loan up to $600 billion directly to money-market funds, which was extended for six months in November.
Housing rescue: $300 billion approved for insurance of new 30-year, fixed-rate mortgages for at-risk borrowers. The bill includes $16 billion in tax credits for first-time home buyers. But lenders have been slow to sign on.
Deposit insurance: $250,000 in insurance for interest-bearing accounts, up from $100,000. The FDIC also issued unlimited guarantees on non-interest- bearing accounts and newly issued unsecured bank debt.
Consumer loans: $800 billion extended to consumer loan-backed securities, including $200 billion for assets backed by credit cards and car loans and $500 billion in mortgage-backed securities. The Fed will also buy $100 billion of Fannie Mae and Freddie debt to try to make loans cheaper.
SAVING CORPORATE AMERICA
Business stimulus: $68 billion in tax breaks to corporations to help loosen the stranglehold on businesses trying to finance daily operating expenses.
Fannie Mae, Freddie Mac: $200 billion to bail out the mortgage finance giants. Federal officials assumed control of the firms and the $5 trillion in home loans they back.
AIG: $152.5 billion restructured bailout, including a direct investment through preferred shares, a easier terms on a $60 billion loan, and new facilities meant to take on the companies exposure to credit-default swaps.
Automakers: $25 billion in low-interest loans to speed the industry's transition to more fuel-efficient vehicles.
Commercial paper facility: $271 billion in corporate debt purchased so far by the Fed since its so-called Commercial Paper Funding Facility opened. The Fed allocated $1.4 trillion for the program.
[Courtesy of CNN Money]
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Do we really want a new New Deal? The answer depends on whether we think Roosevelt’s New Deal made things better or worse during the Great Depression.
