Chart of the year

by Russ Roberts on September 30, 2009

in Financial Markets, Frenetic Fiddling

From this Washington Post article:


Look at that last bar in the chart. It a fading red line to suggest really negative but who knows how much. “Officials did not project a specific number.” What!?! Better sorry than safe, I guess. At least they’re sort of honest.

What is the bill going to be for all the Fed and Treasury and FDIC and FHA and State HFA and auto and other bailouts? Who is keeping track?

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Anonymous September 30, 2009 at 12:21 pm

Well this is obviously Obama’s fault. It was never red like THAT while Bush was president.

thordeer September 30, 2009 at 1:54 pm

Wow. I watch housing markets, and now the government–through guarantees, purchases, and direct loans–is doing most of the lending. The implicit subsidy is huge, but doesn’t show up on a budget/balance sheet. I wonder how much $$ this is.

Dave September 30, 2009 at 3:03 pm

I had been worried about this situation, but it seems that the industry is intent on a prepayment plan and does not want to be seen as receiving a bailout from the Treasury. Normally, I’d be skeptical of such a claim, but it makes sense: the FDIC protects them from bank runs, so they do not want a populist movement against it. Of course, the Treasury is still the ultimate backstop, so the possibility for a taxpayer bailout always exists in the event of a catastrophe much bigger than what they are expecting now… I’m not trying to defend the FDIC, just hoping to help clear up what’s likely to happen in the near term.

Andrew_M_Garland September 30, 2009 at 6:10 pm

The government’s ability to issue guarantees is an unlimited, off-budget, extremely dangerous power. Implicit guarantees were granted to Fannie Mae and Freddie Mac (among other institutions) who used them to borrow massive capital resources. Used unwisely, this triggered the financial crisis.

The FDIC is another, huge guarantee. It is a gift to the banks and a cover for any indadequate oversight by the government. We don’t know if premiums charged to the banks by the FDIC were appropriate before the financial crisis. The banks and their depositors didn’t have to worry, because the government was picking up the tab for any mistakes.

The FDIC means that the banks can play “Heads I win my leveraged bets, and tails my depositors don’t lose.”

This guarantee business has got to stop.

We Guarantee It – The Government Caused the Economic Crisis

Anonymous September 30, 2009 at 6:20 pm

Yeah. Fractional reserve demand deposit banking is a good thing.

Anonymous October 1, 2009 at 12:10 pm

The FDIC is NOT insurance! It is impossible to insure bank deposits, because the repayment of bank deposits depends upon the repayment of bank loans. Therefore, the FDIC is really trying to insure against business and personal failure. But, it is impossible to insure against against the possibility of business and personal failure. because the insured entity has some level of control over whether or not it fails. Therefore, the so-called FDIC insurance is simply a tax on the banking industry and weakens its ability to retain capital, the only safeguard of the depositors’ money. I recommend Hans Hermann Hoppe’s essay on the subject, available at

Anonymous October 1, 2009 at 10:21 pm

What bill? These programs are a net gain to the economy, what with the money multiplier and all.

It’s not spending, it’s investment.

The Waz October 2, 2009 at 8:39 am

Hi guys, all what Obama is trying to do is for government to take control of the banking system and screw the private sector and yet to prove u that this guy has no clue what he is doing. I wounder whats the difference between a Rubber Tapper in Africa and Obama ? Simple Obama just got a bigger house.

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