Sunday, January 18, 2009

Bailout, bailout, bailouts ... Who will bail you out?

The following is a list of bailouts the US federal government has carried out in the recent past. The question is how much and how far it can go before it needs a bailout!

You take a guess.

●    Bear Stearns    2008   

JP Morgan Chase and the federal government bailed out Bear Stearns when the financial giant neared collapse. JP Morgan purchased Bear Stearns for $236 million; the Federal Reserve provided a $30 billion credit line to ensure the sale could move forward.    $30 billion
●    Fannie Mae / Freddie Mac    2008   

The near collapse of two of the nation's largest housing finance entities was yet another symptom of the subprime mortgage and housing market crisis. In an effort to prevent further turmoil within the financial market, the U.S. government seized control of Fannie Mae and Freddie Mac and guaranteed up to $100 billion for each company to ensure they would not fall into bankruptcy.     $200 billion
●    American International Group (A.I.G.)    2008   

When AIG was unable to secure a private-sector loan, the federal government intervened by seizing control of the insurance giant. Less than one month after the initial bailout and just days after AIG announced it had already drawn down $61 billion of its loan, the Fed stepped in with an additional $37.8 billion to bolster AIG's securities lending business. In November, with the insurance giant continuing to report heavy losses, the Feds revised the terms of the bailout and purchased $40 billion in AIG preferred shares.     $150 billion
●    Auto Industry    2008   

In late September 2008, Congress approved a more than $630 billion spending bill, which included a measure for $25 billion in loans to the auto industry. These low-interest loans are intended to aid the industry in its push to build more fuel-efficient, environmentally-friendly vehicles. The Detroit 3 -- General Motors, Ford and Chrysler -- will be the primary beneficiaries.    $25 billion
●    Troubled Asset Relief Program    2008   

The Bush administration has proposed a rescue plan to ease the current crisis on Wall Street. If approved by Congress, the Treasury Department will be authorized to purchase up to $700 billion of distressed mortgage-backed securities and other assets and then resell the mortgages to investors.     $700 billion
●    Citigroup    2008   

After Citigroup lost half its value in the stock market last week, the government decided to throw a hefty life ring to the drowning bank. The government will back roughly $306 billion in loans and securities and will inject about $20 billion in capital. This is in addition to the $25 billion the bank received not too long ago. As part of the agreement, Citigroup will freeze dividend payments at one penny per share per quarter for three years, restrict executive compensation and absorb the first $29 billion in losses and 10 percent of subsequent losses. The government could absorb up to $247.5 billion of Citigroup’s losses.     $247.5 billion
●    Chrysler/G.M.    2008   

Chrysler, General Motors and the Treasury Department have agreed upon terms for a bailout package to rescue the drowning automakers. The package consists of $13.4 billion in emergency loans; another $4 billion will be made available if needed. But it comes with strings. The auto giants must reduce their debt by two-thirds, and restore profitability, possibly by lowering wages and benefits. Limits on executive pay and a ban on the use of executive jets have also been imposed. Should the Obama administration determine that the two automakers have not reached the agreed upon goals, they will be required to repay the loans and face bankruptcy.    $17.4 billion


Jesse Nankin, Eric Umansky, Krista Kjellman, Scott Klein

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