Who Will Bail Out the U.S. Government?

In my blog, I thought I was being facetious when I asked the following rhetorical question:

Who will bail out the U.S. Government?

I believe anything can happen, but after digging deeper, I realized there are some serious issues here.

The U.S. government has enormous money problems of its own. The government is much greater in debt than AIG (AIG), Fannie Mae (FNM), and who knows who is else could be next. The national debt currently stands at approximately $9.634 trillion, which is a mind-boggling number! What is also worse this huge number has grown four trillion dollars over the current Bush administration. Now, put into perspective the interest that we, the taxpayers must pay.

How About 230 Billion dollars a year!

Worse yet, the federal deficit for this fiscal year ending September 30 is expected to be in the range of $400 billion - close to the all-time high.

My simple question is where is this going to end?

Have you looked at Tuesday's short-term interest rates? The three-month rates are sickening. Everyone is running to them seeking security. It is possible that the consensus is that these financial companies such as AIG are too big to fail. Is it because of their derivative exposures, which are unregulated with now questionable counterparty risks? There is only about 62 trillion dollars of these floating around.

I love the statement that Dana Perino came out with on Tuesday:

The free market is alive and well. We have systems in place here in our country to be able to deal with shocks to the system like this.

I would not like to see the faces of people standing in line trying to take their money out of the bank. She forgot an important issue:  How much money does the FDIC have? It has something like $50 billion, but is that really enough to guarantee $100K for every depositor? I care to disagree. Just look IndyMac Bank (IMB) blew up and took down approx $10 billion. Don't worry, as we are not alone. England is the same shape - if not worse.

Who will bail out the U.S. Government?

Comments

[john s. gordon:]

2001 to 2008 the alfred e newman presidency - what me worry ?
> jack

2008 Sep 18 07:57 AM

[leh:]

Bush won't even show his pathetic mug here--which may be just as well.
Anything he'd say would likely be more delusional pap. I think McCain is done.

Re the Fed, they have already used up almost half their reserve ammo, so it's not looking good here. Good Op-Ed piece in the WSJ today by Stephen Roche forecasting a long drawn out global recession, with much more pain to come, especially in Europe, where the credit swap default exposure remains hidden to date.

2008 Sep 18 08:30 AM

[cristian:]

What do you mean WHO ? You & countless other taxpayers of course.

2008 Sep 18 08:43 AM

[Jersey:]

Interesting. Given the less than optimal condition of the dollar, the instability of Wall St, and the electoral threats pertaining to Wall St and investors, it might be interesting to note how many individuals actually have 100k in the bank because if indeed the FDIC is good for 50 Billion and, if my math is correct, more than 50 thousand people have 100k or more in an account, it seems the FDIC is going to need another FDIC of it's own. Who would have ever thought we would see a week like this has been, unfortunately where or when it will end is at best undetermined at present. I think we'll more than likely be fine I just really wish I could say it with more conviction.

2008 Sep 18 08:48 AM

[Dr. Jackpot:]

I always wondered how all these people who dress well and do nothing but talk were being fed, clothed and sheltered. It's amazing how many 'do nothings' live in this country. Will they ever??

2008 Sep 18 09:14 AM

[marine41:]

Just don't mess with the "entitlements" Remember what thos who rode "high wide and Handsome" Now if line for their "piece of the pie"

2008 Sep 18 10:36 AM

[Joyful Alte...:]

Don't blame me. I voted for Ross Perot.

2008 Sep 18 11:06 AM

[Here's a th...:]

Andy,We live in an ADD world. I could explain it but you'd ask the same question again in a few days.

2008 Sep 18 11:11 AM

[dgrinde:]

It will end with the American Government crushing the dollar on purpose.
The Fed is private bankers. They made their money every step of the way already. We are on the hook with illegal income tax fraud. I'd say the Amero is our next step towards the new world order.

2008 Sep 18 12:06 PM

[robertsgt40:]

Tar and feathers seem appropriate at this time

2008 Sep 18 12:13 PM

[wallyjm:]

sell your stocks and put the money into dollars. the safe thing to do. right.? better to put the money into stocks in other coubtries which do not have our problems.

2008 Sep 18 12:48 PM

[escapefromb...:]

Maybe someone in authority could actually find the $2.3 TRILLION plus missing from the Pentagon, in addition to other missing TRILLIONS within the federal government. That would at least put a dent in government debt. Maybe it's time to question Dov Zakheim, who was comptroller at the Pentagon, when the funds became missing. Remember Dov? He was an officer of a corporation that made remote control devices to fly really big planes, like the ones that hit the ACCOUNTING DEPARTMENT of the Pentagon on 9/11 and the towers in NY. Where are you Dov??!! You've got some 'splainin to do. By the way, Rummy announced the missing trillions on 9/10/01 (the day before 9/11). What very convenient timing -- for Dov and the government, that is. Also, just a coincidence I'm sure, the contract of the company in charge of security of the World Trade Center expired on 9/10/01 (the day before 9/11). How VERY convenient. The officers of the corporation, Securacom? George Bush's brother and cousin.

My fellow taxpayers, get your vaseline out and get set for a royal reeming.... or do something about it -- en masse.

2008 Sep 18 02:16 PM

[Hal.P.:]

I'm not sure that investing in other countries is such a good idea. If the US system crashes a lot of other countries will take a big hit. In the least I think we should be taking some of our money in investing it in silver and gold.

I do believe that our country can get out of this but it will mean facing the issue and not bandaging it with bailouts which I think in the end could lead to financial gangrene for the patient.

2008 Sep 18 03:07 PM

[Jetliner:]

Welcome to the new Socialized Capitalism. We now have a government willing to "bailout" every overpaid blundering idiot who over-leveraged his company. The taxpayers are kept in the blind and forced( not asked) to pay for this in coming inflation and the perpetuation of "laissez-faire" economics? Nothing could be further from laissez faire; yet looking at today's rally all the big money just voted for just such a vast bail out of all their mistakes.
Gosh it would be nice for the common man to say "oh gee I made a mistake becoming a tradesman, thanks for the $1m so I can continue my ways". No but the government appears ready to help the rich maintain their lifestyles. Disguted!

2008 Sep 18 04:13 PM

[Tall:]

Gentlemen: There may be a be a bright side to this: perhaps this will shock some sense into our spendthrift elected officials once and for all.
That may sound like wishful thinking, but a scalding bath may be the only think that works. I agree with Hal P. If we can return to some fiscal sanity and dispense with Uncle Sucker foreign policy, things could get better.

2008 Sep 18 09:56 PM

[xsuddensam:]

Were are done.

I'm keeping just enough cash in the bank to pay next month's bills--that it.

And treasuries.....flight to safety? You gotta be kidding. How can buying government debt be safe?

2008 Sep 19 05:18 AM

[rockymtnway:]

The government can always print more money, which is exactly what they are doing. What difference does it make if you threaten to raise interest rates to slow down inflation if you just print more money? This, my friends, is a farewell to the American dollar. If you think the last price spike in oil was bad, wait until those dollars are worth 20-50% less. I can't figure out why Wall Street futures are so high right now, minutes before the opening bell. Delusional thinking if one thinks destroying the dollar will save the markets in the long run.

2008 Sep 19 09:23 AM

[ruzam:]

"How About 230 Billion dollars a year!" . What are you talking about ??? Federal income tax on the working stiffs is now a Trillion$ per year, with and all of it going to the Fed Reserve as interest payments on their monopoly money, iow, quasi legalised counterfeiting, as the Fed is neither Constitutional nor actually legal since a quorum was not present in Dec 1913 nor was there ratification of the 16th Amendment.
You or i print up a $1,000 `worth` - 15 yrs in the slammer. But the Fed Reserve, a private consortium, over the last 95yrs has printed up TRILLIONS of counterfeit $$$ and has always had any President's ear.

2008 Sep 20 07:39 AM

[wakeupamerica:]

The Goverment has never paid any of my bills when I could not pay. They can not even help low income with afordable health insurance, what about the problems with social security. What will you do when you become elderly. I know the goverment is not going to solve this problem. You do not keep making the same mistakes over and over and keep getting any with it. If this rich ceo of the big banking for wall street have got them selfs in this kind of trouble you do not want them around. I am sure their families are very well off and not going to suffer. The rich get richer and the poor get poorer. Wakeup standup for your rights to do what is right. The rich have been stealing from the poor for hundreds of years. the labor class of workers have been providing service for the upper class for ever, use your head America, think!

2008 Sep 28 11:45 AM

[User 370076:]

What I would like to know, is who is going to bail us little people that both of us work, and are in debt as not enough money to get out of debt, yes I know we made our debt, but why not help people pay off their houses that could only buy old, and I mean old houses and needs repairs on them and stop these people buying huge houses that they knew wouldn't pay pay off and stope this, us LITTLE PEOPLE NEED HELP TOO...INSTEAD OF HELPING CREDIT CARD BANKS HELP US TO PAY OFF HOMES THEN WE CAN PAY CREDIT CARD...

Mar 05 08:29 AM