Out of Control

Government programs guaranteeing the liabilities of financial institutions have proliferated in the past year. Among the acronyms representing these programs are TARP, TALF (funded by TARP), TAF, CPFFF, AMLF, TSLF, MMIFF, TPP and TLGP. These programs have mutated and proliferated so quickly that it has been hard to keep up with them.

The summer 2009 issue of the FDIC’s Supervisory Insightscarries an article summarizing the government support for financial assets and liabilities announced in 2008 and soon thereafter in its table 1 (Treasury programs, Federal Reserve programs, FDIC programs and joint programs).

The numbers are prefaced by an important note explaining that “the amounts are gross loans, asset and liability guarantee and asset purchases, do not represent net cost to taxpayers, do not reflect expected private capital expected to accompany some programs, and are announced maximum program limits so that actual support may well fall short of these levels.” Nevertheless, they signify something.

According to table 1, the total gross support extended in 2008 was $6,788 billion (i.e., $6.78 trillion). That’s a big number, but it has increased with stunning rapidity during the Obama administration. The “maximum capacity of support programs” announced or in place through the first quarter of 2009 was $13,903 billion (i.e., $13.93 trillion). The breakdown of the numbers provided comes with 22 footnotes that should be consulted for clarification.

For reference it may be helpful to compare these newly created government programs with the the gross domestic product of the United States. In 2008 the GDP of the United States was about $14 trillion. The recession will probably cause it to contract in 2009 to an amount that is exceeded by the total of the government support programs announced or in place through the first quarter of 2009.


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