You won't believe where that $700-billion bailout figure came from

Here's something that John McCain and Barack Obama and Sarah Palin and even longtime Washingtonian Joe Biden probably don't know. Not to mention Bob Barr, Ralph Nader and Ron Paul, who usually knows everything.

It's a fascinating footnote to the economic and political bailout debate that's kept so many people from more properly focusing on the pennant races and the Colts' problems in the last week. (Incidentally, do you think we'd have had this big fight if President Bush had called it a "rescue" plan instead?)

Our buddy from two lifetimes ago, Carl Lavin over at Forbes.com, points out a fascinating paragraph buried in a story on his website late last week by Brian Wingfield and Josh Zumbrun.

You know, this $700-billion figure that exploded into everyday political parlance almost as fast as Sarah?

The $700-billion "cost" of resolving the financial crisis and restoring confidence and liquidity in the credit markets starting this morning?

The $700-billion figure that Senate Democratic Majority Leader Harry Reid first said he could really use McCain's help with, but then the Arizonan took him up on it and Reid suddenly said the Republican would only get in the way and anyway, Reid said, he already had a done deal, except he didn't and the Nevadan ended up being the embarrassed one?

The $700-billion figure that dominated the first part of the first presidential debate of the 2008 general election season between McCain and Obama?

The $700-billion figure that won't really end up being anywhere near the actual cost because no one knows what all those mortgaged properties are really worth now anyway? Which is the whole problem in the first place because the institutions holding that paper don't know the value of what they're holding either, which is why everyone suddenly got so frightened?

That $700-billion figure that won't really last because eventually the feds will sell off what they're buying and might even make a profit in the end as they did with the Chrysler bailout warrants years ago?

You know where that very important $700-billion figure came from?

Here's a quote from that Forbes story:

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

They made it up to be sufficiently ginormous to frighten everyone into rapid action.

And it worked.

--Andrew Malcolm

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Photo credit: U.S. Treasury Department

Comments

[Liberty Girl]

If this weren't so serious, this fact would be hysterically funny. In light of the situation, it is frightening. It like we are lambs being led toward slaughter and Democrats are so complicit they think they are SAVING us from ourselves. They forget in the end they too will be consummed by it all. God help us...

[Kyle]

None of these people currently in government deserve to be there. It's time to throw these bums out.

Obama-Biden 2008!

[Steve Z]

So somebody pulled a big number out of his rear end, and the media ran with it. A tribute to their intelligence!

Oh, by the way, thanks to Rep. Boehner and the House Republicans, we start with "only" $250 billion and increase from there only if Congress agrees later on. Taxpayers might want to send him a thank-you note!

[jean]

What the Democratic Congress has done to this Nation especially in the last two years is terrible. The Democrats want us to believe this is Bush's Bill, no, it was conceived in the minds of the Democratic to help elect Obama because he is supposedly an expert on the economic.
The Democrats did stop to realize this affect all Americans, not just Republican.
I I have read and listened to all kinds of experts, and I don't think this is the way to go, espeically when we are told more moneis will be needed.

[Joe]

You have admitted that there is no way to estimate exactly what the assets are worth, so there is no "actual" cost to the program. The Treasury is not spending $700 billion in cash. they are being given the authority to borrow that much.

If you think that number is too high, or that the problem is exaggerated, by all means tell us what you think it will take to avoid financial meltdown.

The fact is you don't really have a clue. "Covering" the news, your profession, gives you expertise in finance or economics, so please tell us based on what expertise you think this does not make sense.

[bob]

It "is" hysterically funny, just not funny ha ha. Funny as in how the Bush admin. was again able to frighten (blackmail) the People into submission in order to bail out his wall street consigliere.

If you don't like being a lamb led toward slaughter then stop being a sheep, vote for change.

[Bob Smtih]

Andrew, there is nothing you know that Ron Paul doesn't already know.

[w00t]

"They forget in the end they too will be consummed by it all."

Really not. They have money, they are over everything, rule everything, behind your back. You really think this crisis is accidental?

[Joe K.]

This 'journalism' is rather disingenuous. The hearing last week had both Paulson and Bernanke saying the figure was about 5% of the 14 trillion dollar housing market, what they estimate to be the number of 'toxic' debts.

They may not have a certain math formula for that % being deemed the estimate on bad debts, but it's at least not as filppant as you suggest 'pulling it out of the air'.

[Mike]

This blog is worthless. Yes, investors are having a hard time estimating fair maket values and yes it's being labled the "$700 bailout plan." However, do you honestly think they're going to drop 700 billion down because they wanted to make sure it was enough? That's why it's a PLAN, not the cost or "figure." Obviously, that's what is being debated, where the money is going and under what circumstances. $700 billion is just the MOST that will be invested, not how MUCH.

[NotBuyingIt]

This story BABBLES like a Sarah Palin answer. Hello, Sarah, is that you behind this article? Obviously a like scatterbrain. Try *complete* sentences next time.

[steve rodriguez]

Nancy Pelosi is a true American idiot!!!!

[MKS]

There are, I understand, about 51 million mortgages currently held in the U.S., of which about 3% are in trouble. Let us suppose that the average mortgage is $300,000 and also suppose the worst case - the entire mortgage is a loss, and the property it is on is worthless. This computes to (51,000,000)(0.03)(300,000) = $459 billion. So I wondered, "Why $700 billion?" Then I heard about the $100 billion for ACORN. That is probably just one major beneficary in this transfer of wealth away from the taxpayers.

[Frank Borelli]

So, my question still remains: Is there REALLY a HUGE financial crisis? Or is the BIG problem the fact that a bunch of fat cat CEOs don't really know how much money the companies they lead are worth and THAT'S what's causing the meltdown? How about the fact that real estate has been artificially inflated for the past 7 years and is now returning to more realistic numbers? Ever wonder why there was such a big difference between the APPRAISED value of a property and the ASSESSED value of a property? There's a part of me that WANTS to see this bailout fail just so the fat cats lose their shirts. And remember this because it is of utmost importance: the government never spends its own money: ONLY OUR TAX DOLLARS.

[antibanki]

I think its time that we round up all the bankers and throw them in a camp somewhere - after taking every penny from them and their entire extended families. These vermin who claim to be such geniuses that we should entrust them with our money, happily stuffed their pockets with the profits they earned and now have the gall to ask us the taxpayer to bail them out?

Time to get out the tar and feathers!

[george in toronto]

One sure cure in fixing the rich--no income taxes deferment of stock gains and no dedictions in stock losses.That is how most rich get away in not paying taxes.
All Income tax returns be made public on the internet.Now that will surely fix sick America.

[Evil Otto]

"None of these people currently in government deserve to be there. It's time to throw these bums out.

Obama-Biden 2008!"

Umm... Kyle... buddy... Obama and Biden are both currently in government. Unless the Senate declared independence and split from the Union while I was on vacation, and I missed it.

[KC in CA]

Liberty Girl: What are you talking about? McCain, Obama and Biden are ALL in the same government. They're our Senators. They're the bums you wanted to thrown out.

[Chromium]

Evil Otto:

Not only are Obama and Biden still in government, but the BDS sufferer's target leaves office in January no matter what...

[Shauna Nicholson]

That's incredible. The Twitter world is all abuzz with all things economy lately, which has been an interesting shift from "all things presidential candidates."

It's hard to say that this is surprising; regardless, I'm glad the "tactic" was effective.

[Kelly]

Go Evil Otto!! That was GREAT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[kevin]

so let's see......houses are too expensive ,but all our money is invested in these houses because of our love affair with sub-prime mortgages and other unfortunate events, now if we let the price of houses fall well we're out alot of money so let's scare the government(taxpayers) into taking the losses and we'll take the gains!!!not to mention that inflation would rise even more ....and who notices that oil will bottom out and probably be the cheapest ever if we don't bail these mofo's out...the market has risk!! THIS IS AMERICA DAMMIT, I'M ONLY 22 AND I GET IT ...THIS IS VERY SIMILAR TO THE DEPRESSION WHERE PRICE SETTING MADE EVERYTHING WORSE AND ITS HAPPENING AGAIN

[Charles D]

Call me cynical, but I'd like to know how many of those House Republicans are buying up stocks ( directly or indirectly ) at these fire sale prices.

[Doug]

Hmm, so the decline the bailout ("rescue plan"). Oil futures are down over $10 on the day and the dollar is up because we dont have to borrow up to 700 billion now.

Everything sounds good to me so far, I say lets have this thing work out with free markets and let the strong survive as it should be.

Two quotes ive heard that really explain the last couple of weeks:

"If a company is too big to fail, then its too big to exist."

"Where I come from, we arrest criminals, we dont bail them out."

[coolbreezei]

700b is supposed to be 5% of outstanding mortgages. They figure a 5% foreclosure rate.

[jbtay]

If you think it is democrat or republican you are fooled the only difference between the two is rhetoric.

We being led to the slaughter by both sides. To believe you can only choose between two sides is the biggest of all conspiracies!

[trainer]

So us idiots in The public are running upwards of 90 percent plus against.

Do we not understand the crisis, or do we just not trust congress and their lapdog media?

Why do I wonder that?

While everyone else gave bi-partisan speeches, Pelosi gave a horrendous screed against Bush and Republicans.

Pelosi allowed 15 Dems in tight races to vote against the bill, including 5 committee chairs.

Obama stated Friday that the deal was done...this to shortstop McCain getting any credit for anything he might have been able to accomplish.

The bill went from 3 pages to 110 pages of pork.

They are still playing politics. Why should we believe there is a crisis if congress doesn't?

[catriona scotach]

This is flabbergasting.

But then, I learned from chatting with a rocket scientist friend, that, when faced with the need to plug numbers in to highly theoretical formulas, occasionally he would hold his breath and pick one almost intuitively out of thin air in order to move the process along.

At the time he made this admission to me he was developing satellite constellation communication systems. The description of how he would arrive at the nebulous fractions almost sounded like wizardry -- an incomprehensibly sophisticated art form. He was afraid it would be found out that he was in essence, guessing. Educatedly guessing for sure, but guessing nonetheless with billion dollar projects bound for space.

[P D Salvia]

Marilyn Monroe said ...Listen but don't believe

My grandpa said... Believe half of what you see and nothin of what you hear

This chick says when the fat cats (all of them) in NY and Washington talk - believe the exact opposite and you might be close to what is really happening.

Don't believe it until it is officially denied

[Bobby]

Of course they just really wanted to chose a very large number. What else is new? This has been going on in one form or another for as long as I can remember. A COMPLETE AND TOTAL DISRESPECT OF THE AMERICAN CITIZENRYS TAX MONEY. The way this nation has abused and thrown around Americans taxes, with Americans getting ,NOTHING, ZILCH, NADA,NIX, for those taxes for at least the last 50 years is the way the leaders of this nation have been operating. It's abuse, it's criminal and those responsible should be removed from positions of authority. The amount of wasted tax money in this nation over the last 50 years could have provided health care for every man, women and child in this nation, and fixed all of the infrastructure to boot. The criminal politicians and lobbies have had a very nice run in this nation for a long time, when will it stop?

[Canuck thoughts]

Obama should get rid of the Fed Reserve. These are private Bankers extorting the World.You cannot buy gold now because there isnt any the IMF is holding most of it go try and see. $700 billion or we'll ruin your economy by not giving loans.Sound like Extortion to me.Pay all our debit or we'll destroy you, after we pocketed it all and are filthy and I do mean Filthy rich. Do what Lincoln did print your own money get rid of the Fed, dont use the Bankers Fiat currency.This time protect your President! America could be the start of the change of a far more prosperous and fair World, and put all those sobs in jail. watch this link and LEARN and ACT to PROTECT YOUR COUNTRY FROM FINANCIAL SLAVERY.http://www.heyokamagazine.com/HEYOKA.12.%20MoneyMasters.htm

[J-Rillo]

One of the most recents posts ends in "God help us..." . The thing is God is allowing this to happen. Why? Because the American people have put God on the back burner. The American people want God as a back up plan. An "Insurance Provider". The Word of God ( who is also Jesus, see the book of John the first chapter) says in Proverbs 3:5,6 'Trust in the Lord with all you heart and lean not on your own understanding; IN ALL YOUR WAYS acknowledge Him, and He will make your paths straight.' God wants to be YOUR as well as this NATIONS "SOLE PROVIDER" not "insurance provider". The Word of God is like our Benefit Booklet, if we would just read it, believe it, and apply it. Jesus said that all things are possible to those who believe. So just believe and trust that God will be your Provider no matter what happens. WE MUST AS A NATION bow down to God, the Word says that 'every knee shall bow, and every tongue confess that Jesus is Lord.' So if MONEY/WALL ST/THE GOVERNMENT is your GOD or who you give your WORSHIP to be ready b/c they are coming down. God will share His glory with no one. Just believe in the Word, because 'God is not a man that He should lie.' How do I know that God will provide for you? Because He provided for everyone in the Bible. It may have not been the way they expected it but He did. And guess what, they still did not appreciate it. So appreciate Him for whatever He does to provide for you, no matter how big or small. Acts 10:34 says '....that God does not show favoritism ....'. What does that mean? That means that if anything in the Word of God applied to those in the Books of the Bible, good or bad, it also applies to you, me and everyone else, whether they believe the Word or not. So I challenge you to BELIEVE GOD and apply His Word in your life today, dont rely on the system of this world any longer. Jesus said in Matthew 6:32-34 [paraphrased], "your heavenly Father knows (what) you need. But seek first His kingdom and his righteousness, and all these things (listed in Mt. 6:25-32) will be given to you as well. Therefore do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own". Amen and God Bless you.
J-Rillo
electricjay7078@hotmail.com

[Marko51]

Not to worry the Fed has baked up another 680 billion despite the will of the people....

[Erik]

Congressman Paul's expertise on monetary policy is very impressive indeed, what is equally impressive is how much it gets under Andrew Malcolm's skin.

[nuff_with_the_fluff]

Get off the housing market distraction....

The government could buy all the mortgages for about 100 billion....

It's all about Derivatives!!

Excuse me... "financial instruments"

You don't even need to change the laws....
Just enforce existing ones.....
(Though I personally advocate getting rid of the dirty D's all together)

Americans should be writing their media, screaming why they are placing
the blame on the U.S homeowner, rather than these ridiculous ponzy schemes..

They're leveraged upwards of 100 times and are in the trillions.....
Anyone know how many 700 billion injections a quadrillion dollars are??

Bad home loans....
Gve me a break!

[artie]

Did anyone realize that part of this 700 Billion package was going to help out the UK Banking industry. . some 180 Billion . Barklays getting a piece of it . . were dealing with a bunch of snakes here. both sides cant be trusted. they all need to be voted out , from top to bottom. the bottom line is that they can structure a massive loan to wall street and have wall street themselves pay back this loan through a percentage of the profits they make as a whole . . there fore they will be held responsible for their own screw ups . . .then our banking system should restructure the mortgage mess and give those that were struggling a 30 year fix rate instead so they dont loose their home and the bank benefits on the continuous payments received, instead of having a partially destroyed house no body wants. but what do i know, i am not educated like everyone else. I just install sprinkler systems for a living. . oh well , always refreshing to think once in a while .

[Jim Ray]

Ron Paul may not know everything, but in this case, HE TOLD YOU SO, AND YOU PEOPLE DIDN'T LISTEN. What do you think of "Paultards" now that all the predictions of a clusterf*ck have come TRUE, huh???
JMR

[HAMMER]

None of these people currently in government deserve to be there. It's time to throw these bums out.

Obama-Biden 2008!

Posted by: Kyle | September 29, 2008 at 05:41 AM

Am I the only one who finds the hypocrisy of this statement amusing. To paraphrase Kyle; "Lets throw the bums out except these Obama and Biden guys, Lets promote them instead!" WOW if people are really that stoopid then there is no hope for the republic.

[MAX]

did some quick math $700,000,000,000 divided by 124,085,790 taxpayers (from IRS 2006) comes $5624.26 each. That means if you and your wife work thats $11248.52 maybe you got 2 kids that work (if they pay taxes) too that comes to $22497.04. The solution to this is vote them all out (Obamas and Mccains too) set term limits for everyone and no ontributions from corporations.

[Curtis]

If you are truly interested in an explination of how we got here, take a look at this. Its worth the 11 minutes it takes to watch it.

http://www.youtube.com/profile?user=themouthpeace&feature=iv&annotation_id=event_994846

Term limits....best thing since sliced bread.

Could not agree more......they are all crooks and its time we stop the bleeding.

[Ron]

It Doesn't matter how much money they throw at the problem they've created. They will just take the bail out and inflate the U.S. Dollar even more resulting in a much harder fall for the American people. This economy is going down nothing will change that, the Parasitic banking and investment elite just want you to pay the bill, while they go strolling in their private utopia absolutely oblivious to the pain and suffering they have caused, Hell their being rewarded for it! I heard the greedy little pigs are organizing a world monetary system with of course the ones that created this problem dictating terms.
I think back all the way to the Civil War, WW2, WW1 and think of all of those brave and honorable men that risked everything to protect this country and its children.
What did they fight for? for a bunch of greedy Investment, and European bankers to rob their grandchildren of their inheritance and leave them homeless in the very Nation that their grandfathers died for. I think its time to remember that we are Americans first and a member of a political party last. The political parties just exist to obfuscate our American heritage that is beautifully spelled out in the Constitution and the Bill of Rights, Read them and you'll understand what these liars have done.

[Curious Orange]

President Pinocchio has zero credibility
If these firms are "too large to fail" then that is the problem because they just get bigger and Pinocchio wants to make `em bigger still?

[RexLAX]

Isn't it obvious that they used the "Palin Index" to arrive at the $700 billion figure?

The Palin Index:

When Mayor Sarah Palin left office in 2006, she left the town $22 million in debt -- about $2,292 for every one of the town’s 9,600 or so residents.

If you take that figure -- $2,292 -- and multiply it by 305.3 million (the current U.S population) you get $699.7 billion (close enough).

There ya go.

[Quisani]

If this situation weren't so bad, I'd almost laugh at this number. What makes me cry, though, is that actual people are dealing with an immaginary rabbit-out-of-a-hat-number to deal with actual crisis.

www.quisani.com

[John]

How many 20 million dollar bonuses will 700 billion pay for? Can't go without campaign donations. Two parties, one philosophy. Why isn't there a talk show host out there with the gonads to interview Chuck Baldwin.

[Walking Turtle]

Um, remember Mr. Ralph Nader? Well, that Honest Man has proposed an HONEST turnaround plan. A child could understand its terms, conditions and benefits. Details on http://www.votenader.org. Um, remember Mr. Dennis Kucinich? Well, that Honest Man has ALSO proposed an *honest* turnaround plan. Indeed, children everywhere could understand (and benefit from) its terms, conditions and benefits. See http://tinyurl.com/52aoww for details from the campaign Web site. Um, remember US Ambassador Leo Emil Wanta? The one the Bush Gang skrued, and reliably lied about so skruing? You know, "WantaGate"? Well, that Honest Man's Good Right-Hand Man, a Systems Analyst who is NOT running for President at all named Michael C. Cottrell, has himself proposed an HONEST National Economic Turnaround Plan of his own. No mistake, a child could understand its terms, conditions and benefits. Click http://tinyurl.com/48ffjs into yet another New Tab for the full account. See http://www.worldreports.org/news for the full, non-faulty and entirely intelligent (also very colorful, in a yee-haw sort of way) actual history of this our very own American classic world-class Whitehat/Blackhat Merry Money BubbleBoggle Chase. (Follow the stolen Basil-I/II International Settlements money and the tale of Her Majesty's Stolen Gold there.) THEN review the prior years' mainstream-media econ headlines and Fill In All The Blanks that you have been saddled with while you were not looking because they blindfolded and blindsided you every day for eight solid years. (More like thirty, really.) The "A-HA!" Moment headed your way from this exercise is *priceless*. Then line the Honest Plans up side-by-side and Just Go Shopping point-by-point. Your Best Buy is indeed still available! Act NOW. This is NO DRILL. Been "econobabbled" over the Telly-Vision by Bernanke/Greenspan/Paulson /et/ /al/ into thinking sumpin' like, "Oh, I shall never understand any of that economick voodoo-science - they use Special Words that make no sense and surely it is only because I, a lowly strugglin' wage/salary slave, am just too stupid and uneducated to understand any of it, and besides, they are very very rich so surely that is the answer, for I am helpless and nearly homeless already anyway"? Then you too, Gentle Reader, have been (as we call it streetside) BAMBOOZLED into slitting your own sweet intelligent reasoning power's jugular for THEIR continuing benefit. Um, ever been conned by a streetwise street-con tag-team? Then you will recognize this present economick emergency situation on contact, Gentle Reader. Bottom line: Learn your world economic fundamentals from HONEST MEN. (But if needs be, back up - and first learn to reliably *identify* the Honest Ones.) Avoid enabling any more history being made by the greedy criminal Beltway/Wallstreet fools who only want all your money and see you as "Just Another Useless Eater" in their own NAFTA-driven, uber-privatized, pan-globalized funny-money bubble-mill. No fait is so accompli as those rascally rapscallions, the Beltway Meisterschwindlern of this war-torn and bleeding world would force your compliant belief. Just TAKE BACK your MIND first! Opinion: Li'l Bush wasn't kidding about things being easier for him in a dictatorship form of governance "just so long as I'm the Dictator". He still means every word, though the "breakfast sausages" on his Presidential plate Tuesday morning (09/29/2008) were very bitter and hard indeed to chew, let alone swallow. Action: Flood the Capitol Switchboard on Friday once again, is all I can say. Speak your mind to your rep's aide, even (ESPECIALLY) if it is Mizs Pelosi. Speak for an HONEST REFORM. Prtovide Web citations for the staff to study up and pass "Topside" to The Boss on the House Floor. (Thursday is good for this activity, too...) Bail 'em out? THROW them out! All but the HONEST FEW, I say! ANY party but "Democrat"! ANY party but "Republican"! ANY new candidate not affiliated with the Two-Party Gang stands as a fair shot for HONEST solutions, compared with EITHER of the Approved Choices now all over the Telly-Vision like there's nobody else left to vote for! Lookit, Wall Street: This is Main Street talking. THIS America is MINE. And my neighbor's, too. WE have a SURVIVAL STAKE in this outcome, do you GET IT YET? MY America, I say - and yours as well, Beloved Gentle Honest Reader. Now let us MAKE IT SO, all Wall Street+dog (and Diebold too!) be damned.

[steve driscoll]

Steve Z, "somebody pulled a really big number out of his rear end, and the media ran with it. A tribute to their intelligence." Steve, I think intelligence hasn't got a lot to do with it. I think it's more the foolishness, audacity, and sheer wickedness of these people.

[Dave]

There is no getting around this fundamental concept: if you don't believe the free market can correct this problem then you don't believe in freedom itself.
The fall of the Berlin Wall clearly demonstrated that central planning of the economy does not work. Bankruptcy is ok. It takes assets from inefficient operations and places in the hands of the efficient. If this "toxic debt" isn't good for the private enterprise then why is it good for the public enterprise. History has shown over and over that government intervention merely prolongs the problems and makes them worse.

[daniel]

This article is just as much fluff as that number. You have maybe 4 or 5 actual paragraphs, and so you just kept spewing stupid repetitive statements to meet your word count.

[CharlesP]

700 trillion Bailout to "save the nation".
9-11, and bypassing normal procedures to spy on Americans.
The sky is falling, the sky is falling!

This is all part of a plan to TRICK ALL OF YOU TO ALLOW THE RICH TO TURN AMERICA INTO A DICTATORSHIP! SLOWLY YOU WILL BE FORCED TO GIVE UNNECESSARY POWERS TO THE VERY PEOPLE THAT WANT TO IN-SLAVE YOU!