Wednesday, October 06, 2010

U.S. Treasury Underestimating TARP Losses

There's some hullabaloo shooting around the financial mediasphere about how TARP isn't going to become a colossal money sinkhole; rather it's only going to lose a paltry $29B or so according to the New York Times.  The NYT's standards must really be slipping, because their writers obviously have difficulty with grade-school addition.  Someone's got to tell them that a $17B loss on the automakers and a $49B loss on housing programs do not add up to a total loss of $26B.  Someone should also tell them to read the second page of the government's own "TARP: Two Year Retrospective" report, which specifies that only 53% of the TARP loans have been paid back as of Sept. 30.  We can thank AIG and the housing programs for holding up the line.  I don't have time to help journalists figure all of this out.

I also don't have time to deliver a wake-up call to Americans who think the banking crisis is over.  That has been done ably enough by Institutional Risk Analytics in their latest report.  The U.S. banking sector is merely in the eye of a storm and further dislocations are yet to come.  A second bailout is a political impossibility given voter anger at incumbents.  The solution to the next stage of this crisis will require some combination of nationalization, stealth inflation, wealth confiscation, and other severe measures.