The numbers cited here for bank rescue costs are staggering -- way beyond our imagination. Keep in mind that we are talking trillions, not billions. You might want to etch these numbers in your memory to say that you have lived through perhaps the greatest financial crisis of our time.
- The U.S. government and the Federal Reserve have spent, lent, or committed $12.8 trillion to bank rescue, which amounts to about the value of everything produced in this country as of March 31.
- EU governments have approved $5.3 trillion of aid, more than the annual GDP of Germany.
- The UK pledged $1.1 trillion to restore confidence in its lenders, the most of any EU member.
- The top three EU states providing capital injections were the UK with $781.2 billion, Denmark with $593.9 billion and Germany with $554.2 billion.
So then, after all of these trillions have been spent or committed, what is the current status of European markets? A EU paper states that there remains "elevated risk premiums in many parts" of the financial markets and this is "likely to remain challenging."
There has been a decline in lending in Europe, which the EU said: "remains mainly demand driven, but banks' balance sheet constraints and limited access to medium and long term financing" and high risk premiums "may have contributed" to the decline.
Taken together the U.S., EU, and UK have spent, lent, or committed an incredible, staggering and unbelievable $19.2 trillion.
Still, the full cost of the bank rescue debacle is yet to be determined. There could be more to come. Banks still have not put their distressed assets "on the books" yet. There are many more trillions of dollars still hanging out there that have not been disclosed to the public. Sooner or later the banks must come clean, otherwise we can never restore full confidence to the world that our banking system is sound. In addition, we cannot put a true value on any bank stock with all of these hidden monies lurking "off the books."
Will spending $19.2 trillion end this crisis?
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Reader Comments (Page 1 of 1)
6-12-2009 @ 1:39PM
Sharon said...
The values NOT shown on bank book assets are due to government intervention of MORATORIUM. "BING" moratorium. The majority of the OPTION ARM loans with negative amortization "have been held back" due to this government imposed moratorium. Wachovia, Washington Mutual and ALL financials that have failed thus far were due to these loans and subsequent packaging and offerings. The resets have started but definitely not finished and are dependant on origination date. The amounts on these loans will dwarf the subprime debaucle. And you people are still investing in these DEAD banks?