$700 Billion Bank Bailout Extended Until 2010

The administration announced it’s extending the $700 billion financial bailout program until next fall. The Treasury said it’s important to hold onto money and have it available in case any new catasrophes slam our financial system:

“As we wind down many of the government programs launched initially to address the crisis, it is imperative that we maintain this capacity to respond if financial conditions worsen and threaten our economy,” Treasury Secretary Timothy Geithner wrote in a letter to Congress.

Geithner Extends $700 Billion Bailout Program Until October [Bloomberg]

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  1. _hi_ says:

    YAY thanks Obama! You’re nothing like Bush at all! We love how you give our money away to bankers. It’s working great. Billions of dollars given away and still people are homeless and jobless. Thanks again!

    • _hi_ says:

      oops I meant TRILLIANS of dollars given away…

    • Naame says:

      To be fair, this is Bush’s bailout although Obama’s administration is extending it as we can see here. This extension is not providing them with more money though and the banks are still expected to pay it back (several already have). In fact, the $700 billion figure seems overblown in itself. If you read the whole article from Bloomberg you will see:

      “In a letter to congressional leaders, Geithner said the administration doesn’t expect to deploy more than $550 billion of the funds.”

      Anyways, no one likes that this money was spent like this including Obama but I have witnessed first hand some of the benefits. I would not have been approved for the loan I got to purchase my house if Obama’s administration did not manage the credit freeze like they have. My purchase helped our economy.

      • _hi_ says:

        I’m sure Obama just hates that he’s giving away Americans money to offshore banks with no idea which banks the money is being given to. So for you to even say that the loan you received is going to help the ecomony is a little bit far stretched. Loaning out money was what caused the problem correct? So how does loaning out more money solve the problem. It doesn’t. It’s going to create more inflation and at the same time drive down the value of the dollar.

        http://www.auditthefed.com/

        • Naame says:

          If you do not even understand how people purchasing homes responsibly and paying their mortgages helps the economy then I believe it would be best if you do a lot of studying before we continue this conversation. I recommend starting with the basic concepts of trade.

          • _hi_ says:

            I’m not blaming Bush or Obama I know what’s really going on as far as the left/right paradigm. I am not dem or rep or left or right, I’m a concerned American. I also know that loans didn’t cause the crisis it was a contributing factor and that the Gramm-Leach-Bliley Act was the main contributing factor which was done in the Clinton administration with much help from Larry Summers who is now in Obamas’ administration. So much for CHANGE. When it’s the same people that created the problem still in office saying they will solve it that isn’t change. More bailouts & more loans are not going to help.

            btw: I wasn’t talking about tarp money I’m talking about the 12 trillion in bailout money that has been given away to foreign banks.

        • littleAK says:

          Loaning out money didn’t cause the initial problem. ARM loans and handing out risky loans (where the chances of payback are low) was a big part of the problem, although it was more complicated than that. When banks began failing, not being able to loan people money was a huge issue, as it was causing them additional losses, contributing to their failure. Like it or not banking, housing loans, etc. are a big part of our economy. So, yes, banks being able to extend loans will help the economy.

          Bailouts aren’t an invention of Bush or Obama. They are rooted in Keynsian economics and are specifically designed to alleviate the affects of a depression. It is not just thoughtless spending. (And, as stated in another post, some banks have already paid back their funds, with interest.) They most certainly know to whom they lent TARP money.

    • Daemon Xar says:

      Two things:
      1) TARP = loans, not give aways. Yes, I’d rather that those loans be to people, not multi-million dollar banks, but it is what it is.
      2) The economy blew up because the previous administration and some Congressional Democrats almost completely deregulated the mortgage industry. This is not Obama’s fault. He wasn’t President when the terrible decisions that lead to this were made, and he in fact wasn’t even in Congress. It’s not exactly fair to blame him for someone else’s mess that he now has to clean up. But then again, I’m not sure you care to be fair.

  2. JKirchartz says:

    More worrisome is the fact that Obama put a bunch of bankers into his cabinet, and that Geithner was a big-time banker & is used to getting 3.9 million a year… Rolling Stone just did a really good & heavily researched article about Obama & Bankers and their interconnections.

    • Naame says:

      I’ll starting worrying if Obama continues to make even more extensions like this after the recession ends. I would worry now if the banks were not obligated by law to pay everything back, but that is not the case. Whether they pay it back right now or some reasonable time later makes no difference to my life, but allowing them access to it in the first place allowed me to get a loan for my house so as it stands it is working at least for me and probably others too. One could also argue that since some of us were able to get loans sooner than later and that the banks must pay it all back that everyone is currently ahead in this decision as long as Obama and/or future administrations stick to their guns. Only time will tell.

      • _hi_ says:

        How do you know the loan you received was from the bailout money when Congress asked Bernanke which banks received the money and how much did those banks receive and he refused to answer.

        The fact is nobody knows where all that money went. Which is why they want to audit the fed. Just because you got a loan doesn’t mean giving trillions of dollars to off-shore banks with NO transparency is a good thing.

        • Naame says:

          I didn’t claim that the loan I received was from bailout money. I did claim that the money helped loosen up credit which allowed me to get a loan though. There is a distinct difference because much of what was going on did not only surround liquid capital and credit. It also surrounded market confidence all the way down to the underwriters of loans themselves and their bosses which provide them with the guidelines and rules to follow.

          Also, you are contradicting yourself. First you claim that we have no idea where that money went and then you claim that it went to offshore banks. Which is it?

      • Dondegroovily says:

        True, but you would’ve got loans a lot quicker with a lot less gov’t loss if the gov’t just did the loans themselves, until banks start loaning again. And if the banks saw the gov’t issuing a lot of loans, you can sure bet they would start loaning again ASAP.

        • Naame says:

          Maybe. I don’t know to be honest. I do know that the chances of what you are suggesting actually being permitted by Congress wouldn’t stand a chance though. There is no way the Republicans or ConservaDems would go for it. I’m not even certain if I would go for it even though most consider me a progressive. I would have to think about it for a while.

    • ARP says:

      This worries me as well. I think too much of his cabinet and financial advisors have a Wall Street Centric view. This is what got us in trouble in the first place and I worry that it will only exacerbate existing issues and prevent meaningful reform.

  3. TailsToo says:

    So maybe the banks, that are now making record profits and paying record bonuses, should be forced to hold more capital. Here’s an idea, take it from the bonus pool, and then we don’t have to use tax payer money.

    • ARP says:

      Banks haven’t reformed themselves and so they’re still taking unneeded risks. Since the major banks are key the economy, Obama is put in a position where if the banks pay back the money, continue to pay huge salaries, and take unneeded risk, they could expose the economy (again) since they’re not properly capitalized. I think the view is that once bank regulation gets on the books, they can start trying to put the tiger back in the cage. It won’t be easy.

  4. SacraBos says:

    But didn’t Obama just argue at his “Jobs Summit” that the returning bank bailout money should be used to “create jobs” (like the government can create a job) rather than paying down this skyrocketing government debt?

    Sounds like this $700 billion is going to magically multiply and suddenly us taxpayers are out several trillion dollars.

    • Naame says:

      Obama’s goal is not to create jobs directly through the government. His goal is to lay the ground work and open up more opportunities for the private industry to then act and create the jobs. That is a very realistic possibility which has been proven to work when performed correctly both in our country’s history and the history of other countries.

      However, you can make arguments as to whether or not the details surrounding how that is planned to occur is the most effective way to help the situation if you wish, but I do recommend that you stay open minded until the upcoming Jobs bill is finalized. There are a large array of possibilities there.

    • ARP says:

      I find it interesting that suddenly everyone is so worried about our debt, when for the last 8 years (and the 12 years during Reagan/Bush I) our debt skyrocketed and we moved from being a creditor nation to a debtor nation. I don’t deny that our debt is a huge issue, but this feigned outrage at our debt is getting old.

      http://en.wikipedia.org/wiki/United_States_public_debt

    • Daemon Xar says:

      The government, in fact, can create jobs. When it invests in infrastructure projects, like interstate highways (as espoused by that hippie liberal communist, Dwight D. Eisenhower), those contracts go to private companies that then hire employees. This is job creation.

      When the government issues R&D contracts to universities, they often create new technology. Such technology is often licensed out and spun off into new companies. That hire employees. This is job creation.

      When the government provides large loans to banks and financial companies that allow them to make loans to consumers, those consumers (including small businesses) get to buy products and services. Some of this is job creation, and some is job retention. They’re not that different.

      And this is ignoring direct hiring by governments. Last year’s stimulus package provided offsets for states that allowed them to decrease their layoffs, retaining (or creating jobs). A lot of it flowed into economic development agencies, which also creates jobs. Anyone who thinks that the government can’t help the economy recover needs to spend some time reading about the New Deal.

  5. PappaBear says:

    Great, the banks continue to get “free” money courtesy of the tax payer, while charging high interest rates, tightening credit rules, not to mention the mess the credit card divisions are making for consumers. It’s all hurting our economy. Boy that sure sounds like a winning plan to me.

  6. The Federalist says:

    It’s being extended so the funds can remain there for the job creation program. However the logic behind that was “we saved $200B so we can use that for something else now”.

    That’s like racking up a $10,000 credit card bill you can’t afford, return a $1,000 purchase and then say to yourself “well it looks I have another $1,000 I can spend!”

    • Naame says:

      Yes, but I think most Americans would prefer to spend that money on programs intended to result job creation rather than most other alternatives wouldn’t you say? Arguing for or against how effective the future jobs bill will be is one thing (no one has any idea because details of that bill have not been created let alone revealed yet), but try convincing unemployed Americans that are desperate for work that the money should be used in any other way.

      • The Federalist says:

        I’m not against job creation however a country with $1.3T in debt needs to be a little more fiscally cautious. Much of this debt was financed at near 0% rates during the market calamity last year and is soon coming due. There’s obviously no money to pay for it, so it’ll be refinanced using long-term bonds which carry 3%+ rates.

        Look at Dubai and Greece, Ireland isn’t looking so good either. Sovereign debt is the next big issue coming around the corner and we have done nothing about it.

        • Naame says:

          I agree that we will eventually need to tackle the national debt, but doing so during a recession is not the time. How exactly we go about doing that in the future entirely revolves around details surrounding what is going on after we come out of the recession.

  7. Blueskylaw says:

    The bailout money was supposed to help solve the mortgage crisis (re-financing) and getting the banks to lend again. Where has the money gone? Banks buying other banks thereby becoming even too bigger to fail, buying planes, buying toxic assets on the cheap that they helped create, paying bonuses, cash hoarding by banks while raising rates and cutting credit, banks borrowing at almost 0% interest to invest in securities and make more money while depositors get basically nothing.

    These too big to fail companies even get benefits that should never apply. When you are too big to fail, the credit rating agencies give you a higher rating than you deserve because they take into account that the government will bail them out in time of financial stress. So instead of getting a B++ rating they get an A rating which lets them borrow cheaper and gives them more money to gamble with.

    Let’s be done with rewarding unbridled greed, if you are too big to fail then you should be broken up. If you refuse then there should be no bailout for you. Period.
    Use the money for helping the struggling consumer and not the banker who can still afford to make payments on his 100 foot yacht.

    • ARP says:

      Agreed- there are a myriad of ways to control the banks and their impact/risk to our economy:
      1) Don’t let them get too big to fail. Break them up or regulate the hell out of them if they pose a systemic risk to our economy.
      2) Require a reserve ratio on every investment, account, etc. they have. No exceptions.
      3) Up the reserves ratio so that for every $X in outstanding loans, investments, etc. they have $X in cash to cover it. For risky investments require a higher ratio (e.g. subprime loans 3 to 1, bundled mortgages 2 to 1, etc.)
      4) Up the FDIC contributions so that if a bank does fail, the taxpayer is partially covered by the premiums.
      5) Allow the Fed to quickly take over, shut down, and liquidate the banks.
      6) Limit the power of the Fed to loan money at dirt cheap rates and provide more transparency into their activities.

  8. CaptZ says:

    In other words……financial conditions will worsen and our economy is going to be in shambles for sometime into late 2010.

  9. Snarkysnake says:

    Hold on to the money ? How do you hold on to the money when you are broke to the tune of $12 Trillion dollars or so ? Like the Social Security Trust Fund ? Like Medicare funds ?
    It was a long shot against tall odds that the taxpayers would ever get any bailout money back. But now we are faced with the possibility that the money that will be paid back will disappear down the same hole that the “trust funds” that we entrust to congress have gone to.

    Hear me good on this one Consumerist readers : The real meltdown is coming sooner than we think because of the demographic time bomb that is ticking over there in the corner. That time bomb is Social Security and we are running out of “next year(s)” to deal with it or face the possibility that over half of your paycheck will be confiscated to provide for mom and dad. That is ,if you have a decent job.
    If you are stupid or crooked enough to believe that you don’t have to save and invest now while you are young, then I hope you starve under a cold,cold bridge. If you believe that it’s okay for the government to take money away from young workers because you had to have a mini mansion ,2 car payments and a jet ski and saved nothing,then take no action. Your day is coming…