$3.18 trillion — Already been tapped by banks and other financial institutions

$2.4 trillion — Set aside to buy short-term notes, or commercial paper, that companies use to pay bills

$1.4 trillion — Used by the FDIC to guarantee bank to bank loans

$29 billion — To help with the Bear Stearns takeover by JP Morgan Chase and Co

$123 billion — Bailout for AIG

$306 billion — Guaranteed of CitiGroup debt

$20 Billion — Citibank liquidity loan

$200 billion — Promised to Fannie Mae and Freddie Mac

$139 billion — Loan guarantees for GE’s finance unit

The article continues to talk about how this is the worst crisis to hit America – ever – and that the only difference between this and the great Depression is that now we have these tools – the ability to promote liquidity – even though great risk exists.  They do provide quite a bit of both sides – good and bad – for these programs, but they also leave out some of the fundamentals.  In order for these dollars to be realized:

1. All the loans and short-term lending would go bad.  All the banks fail without repaying any of the loans.  Collateral becomes value-less and none of the investment is recovered.
2. All the banks and other companies go under and the preferred stock and investment dollars go bad.  The assets are valueless and no dollars are returned.
3. All the mortgages owned by all the banks go to zero value.  Houses are determined to be worthless, and no value is returned.

Obviously, it’s impossible to imagine a scenario where every company goes under and every home goes to $0 value, so these numbers aren’t real.  There is, of course, a lot of money spent and a lot of money at risk, but even with some losses it’s equally likely that some of these companies will survive and even prosper, in which case there will be an upside realized by the government.  It’s a waiting game, and frankly I do think that the alternative in some of these cases might be a lot worse.

Would love to hear some other opinions.

Ranter

Trump International Hotel and Tower slated for completion in mid-2009.

It’s becoming more and more obvious that the problems with the American economy are going to continue for the next several years.  If for no other reason then the knee-jerk reaction that banks and financial institutions are taking to limit their exposure to real estate related investments.  There is no greater example of this then the recent lawsuit filed by Donald Trump against lenders looking to reduce their exposure on the Trump International Hotel and Tower – a 92 story hotel and condominium high-rise architected to be the second-tallest building on United States soil.

Unlike most Trump stories – this isn’t really about Trump or his ego or even about some grandiose plan to expand his empire.  This story is about terminology, bank loans, and whether you believe that the “unprecedented financial crisis in the credit markets” is equivilent to a force majeure equal to an act of war or a natural disaster.  If you believe Trump (or anyone looking at the first page of a foreclosure document), you would consider the financial markets some sort of natural disaster, and that would require an extension and additional funding as provided in the original Trump loan package.

No matter how you slice it – we’re talking about a lot of money and Trump’s suit includes him asking for $3 billion in damages.  What’s written in between the lines is the reality that the original lending group, led by Deutsche Bank, is partly responsible for creating the “unprecedented financial crisis in the credit markets” that the entire world is suffering through today.  Not solely responsible of course, but definitely not innocent, either.  It should be up to them to help groups like Trump (God forbid another government bailout) and hold true with the terms of their agreement.  Beyond that, it’s their moral obligation at this point to make every effort to sustain theri customers, integrity, and position as a lendor in the community.  If they drop out now it’s a sure sign that more problems are looming on the horizon.

Ranter