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?