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>> Financial Crisis Spending, Commitments, and Loans
In February 2008, Congress and the Bush administration passed a stimulus and tax rebate bill to fight the developing recession. Since then, the federal government has put American taxpayers on the hook for nearly $12.9 trillion in spending, loans, and insurance for deposits and investments.
Here is the money spent on specifically fighting the recession:
- $168 billion for Economic Stimulus Act of 2008 – Feb 13, 2008
In February 2008, Congress passed the first stimulus package as part of the effort to fight the recession. Of the $168 billion, $106 billion went to individual tax rebates and there were $51 billion in business tax cuts.
- $200 billion for Term Securities Lending Facility (TSLF) – Mar 11, 2008
The TSLF is used by the Federal Reserve (Fed) to offer overnight loans to primary dealers, banks who can trade directly with the Fed, based on a competitive single-price auction. In March 2008, the program was expanded to offer $200 billion worth of 28-day loans to increase liquidity in the financial markets.
- $29.5 billion bailout for Bear Stearns debt – Mar 14, 2008
The Federal Reserve gave a $29.5 billion loan to J.P. Morgan to encourage its purchase of Bear Stearns, and aid the process of liquidating Bear Stearns’ assets.
- $10.7 billion for IndyMac Bank – July 11, 2008
The Federal Deposit Insurance Corporation (FDIC) seized IndyMac Federal Bank in July of 2008 after IndyMac’s collapse, which is one of the largest bank failures in U.S. history. OneWest Bank, based in Pasadena, California, purchased its assets for $13.9 billion in January 2009, leaving the FDIC (taxpayers) with a $10.7 billion loss.
- $24.9 billion for Housing and Economic Recovery Act of 2008 – July 26, 2008
Congress gave grants for the redevelopment of abandoned and foreclosed homes in high-foreclosure neighborhoods, and a $7,500 tax credit for some first time homebuyers. The bill gave temporary authority to the Secretary of the Treasury to purchase any obligations and other securities in any amounts issued by Government Sponsored Enterprises (GSE) like Fannie Mae and Freddie Mac.
Congress gave the Federal Housing Administration power to insure up to $300 billion in new 30-year fixed-rate mortgages for homeowners that were facing foreclosure on their current loans.
- $200 billion for Fannie Mae and Freddie Mac Bailout I – Sept 7, 2008
The Treasury Department, in joint power with the Federal Housing Finance Agency, took over Fannie Mae and Freddie Mac and committed $200 billion for buying stock in the two firms, thus recapitalizing them, and providing funds to pay down debt, and cover their toxic legacy assets and loans.
- $150.3 billion for American Insurance Group – Sept 16, 2008
The Federal Reserve gave an initial $85 billion to AIG in exchange for a 79.9 percent equity stake in the company. The price was later reduced to $60 billion but the Treasury Department remains in control of the insurance company. In October they supplemented this with a $37.8 billion loan. In November the Fed purchased $22.5 billion of AIG’s mortgage-backed securities and $30 billion of AIG’s collateralized debt obligations. The bank has separately received $70 billion from TARP as loans in exchange for equity stakes, $40 billion from the Bush administration and $30 billion in March 2009 from the Obama administration.
- $427 billion to improve global liquidity conditions – Sept 18, 2008
In a coordinated effort with major international central banks in Europe, Asia, and North America, the Fed expanded its currency swap arrangements in order to improve liquidity conditions in global financial markets. Swap lines are currency exchanges where central banks loan local currency to each other for a specific period of time. This program sent U.S. dollars to foreign banks for them to lend.
- $152.1 billion for Asset-Backed Commercial Paper – Sept 19, 2008
This ABCP program specifically is designed to finance the purchase of commercial paper from money market mutual funds to increase liquidity in the market. The program will run until October 30, 2009.
- $9 billion to insure Morgan Stanley debt – Sept 29, 2008
In September 2008, Japan’s Mitsubishi UFJ Financial Group bought 21 percent of Morgan Stanley for $9 billion. The Federal Reserve agreed to put taxpayers on the hook for the full $9 billion by insuring the investment.
- $700 billion for Troubled Asset Relief Program (TARP) – Oct 3, 2008
The Emergency Economic Stabilization Act, which created TARP, has been used to recapitalize banks by buying equity and assets ($383 billion), to provide loans and capital to General Motors and Chrysler ($25 billion), to partially fund TALF ($100 billion), to fund the Making Home Affordable Program ($50 billion) and Small Business Administration loans ($15 billion), and to establish the Public-Private Investment Program (PPIP) ($100 billion). See note below about the PPIP’s additional costs.
- $900 billion for Term Auction Facility Lending (TAF) – Oct 6, 2008
The Federal Reserve auctioned an increased amount of term funds to deposit bearing banks, given proper collateralization, in order to increase immediate liquidity in the market.
The Federal Reserve guaranteed money market mutual funds, reinvestment funds, portfolios, and similar accounts to increase investor confidence.
- $1.7 trillion for Commercial Paper Funding Facility (CPFF) – Oct 27, 2008
The CPFF provides a liquidity backstop to issuers of commercial paper (money-market securities sold by large banks to get money to pay short term debt obligations) and improved liquidity in short-term funding markets by financing the purchase of unsecured and asset-backed commercial paper. It is intended to enhance investor confidence and increase the availability of credit for businesses and households. This program is different from the ABCP liquidity program in that it allows the Fed to directly purchase commercial paper, not just finance. The max amount CPFF can purchase is equal to the size of the commercial paper market, estimated now to be $1.7 trillion, though as of March 2009, only $246 billion of taxpayer money has been spent.
- $2 trillion for Temporary Liquidity Guarantee Program (TLGP) – Nov 21, 2008
This program will insure $1.5 trillion of all new unsecured loans (senior subordinated bank debt) that are issued before October 31, 2009. The limit of debt the FDIC will cover is up to 125 percent of all the unsecured debt that existed as of September 30, 2008, estimated to be $1.5 trillion. TLGP will also insure $500 billion for non-interest-bearing deposit accounts until Dec. 31, 2009.
This act provides additional unemployment compensation through August 27, 2009. It funds seven more weeks of unemployment insurance benefits for those still unemployed, and an additional 13 weeks for those in states with unemployment rates above six percent-such as Michigan and California.
- $301 billion for Citigroup Bank – Nov 23, 2008
This money insures against losses on loans and securities backed by toxic assets and mortgages. Citi has received a separate $50 billion from TARP as loans in exchange for equity stakes.
This Federal Reserve program purchases the direct obligations and mortgage-backed securities (MBSes) of Fannie Mae, Freddie Mac, and other GSEs. Up to $1.25 trillion of MBSes will be sold to asset managers selected via a competitive process. Up to $200 billion in GSE direct obligations will be bought through the Fed’s primary dealers in a series of competitive auctions. The original funding for this program was $600 billion, but in March 2009 the amount increased more than double.
This Federal Reserve program has an additional $100 billion in funding from TARP, bringing the total to $1 trillion. TALF is supposed to help market participants meet the credit needs of households and small businesses by supporting new asset-backed securities that are collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration. In March 2009, the TALF program was expanded to include loan support for investors to buy frozen “Legacy Assets” which are older and not as highly rated. This updated TALF program will operate in conjunction with the Treasury’s public-private investment funds.
This act waives, for one year, the rules that require seniors to make annual withdrawals from their retirement plans and accounts. It also reduces the funding requirements for tax-qualified, defined-benefit pension plans. The cost is based on Congressional Budget Office estimates of decreased revenues due to this pension relief program.
- $118 billion for Bank of America – Jan 16, 2009
This money insures losses on loans and securities backed by toxic assets and mortgages. The bank has received a separate $45 billion from TARP as loans in exchange for equity stakes.
- $81 billion for NCUA Capital Stabilization Program – Jan 28, 2009
The National Credit Union Administration (NCUA) committed $80 billion to guarantee all uninsured deposits at credit unions until Dec. 31, 2010. NCUA also injected $1 billion of capital into U.S. Central Federal Credit Union of Lenexa, Kansas.
- $787.2 billion for American Recovery and Reinvestment Act – Feb 17, 2009
Known prominently as the “stimulus bill” this act is supposed to preserve and create jobs; invest in technological advances in science and health; to invest in transportation, environmental protection, and infrastructure that will provide long-term economic benefits; and stabilize state and local government budgets.
- $200 billion for Fannie Mae and Freddie Mac Bailout II – Feb 18, 2009
The Obama administration increased the Treasury Department commitment to Fannie Mae and Freddie Mac an additional $200 billion to $400 billion total.
- $25 billion for Making Home Affordable Program – Mar 4, 2009
This program, funded in part by the FDIC and FHA, will offer financing assistance to up to 9 million homeowners to help them pay their mortgage and avoid bankruptcy. The program includes the Home Affordable Modification Program and has $50 billion of additional funding from TARP.
- $300 billion to purchase “longer term” Treasury securities – Mar 18, 2009
To help improve conditions in private credit markets, the Federal Open Market Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months.
- $900 billion for Public-Private Investment Program – Mar 23, 2009
The jointly managed Public-Private Investment Program from the Fed, Treasury, and FDIC will match taxpayer money with privately invested funds to purchase Legacy Assets from bank balance sheets in an auction process. Treasury will provide $100 billion from the original TARP bill to provide partial equity. But the Fed and FDIC will also provide financing with non-appropriated funds. This means there is no price ceiling on the PPIP, and the total could reach up to $1 trillion depending on how much financing is required to buy Legacy Assets.
- $300 billion to improve global liquidity conditions – Apr 6, 2009
In a coordinated effort with major international central banks in Europe, Asia, and North America, the Fed created new temporary lines of credit in pounds, euros, yen and francs in order to improve liquidity conditions in global financial markets. These foreign currency liquidity swap lines are loans to foreign banks authorized until October 30, 2009.
* Note that in some of these expenditures, the taxpayer money going out is a loan that is projected to be repaid with interest. However, taxpayers are on the hook for this money regardless of whether or not the firms are actually able to pay it back.
** This page has intentionally left out spending directly related to the federal budget and focuses on the extraordinary activities by Treasury, Congress, FDIC and Federal Reserve.
(Updated: July 1, 2009 — We will update this chart each month)