In a complex set of arrangements, the federal government has stepped in to stabilize the credit union industry, as reported by the Wall Street Journal. The bailout involves wholesale credit unions. They invest money for retail credit unions and provide them with check-clearing services.

During the housing bubble, these wholesale credit unions invested in subprime mortgages, and guess what? They lost a bundle of money for their clients, who are retail credit unions.

Financial guru, Nouriel Roubini foresees rising sovereign debt leading to defaults.

Roubini predicted the U.S. financial collapse at least a year before it happened. Now he is predicting sovereign defaults for European Union (EU) nations.

The federal budget year ended in October. The October deficit number set a record of $176.4 billion, which was higher than the $150 billion economists had predicted.

For the budget year 2009, the deficit reached $1.42 trillion. That too was an all-time record. This year's deficit was $958 billion above the 2008 deficit. October was the 13th straight month to show a deficit.

Over the past decade we seen at least $1 trillion dollars spent by private equity firms. These firms have taken over companies for a pittance and then pillaged them by slashing employees and cutting costs. They then used the money to pay down debt rather than rebuilding the company.

Now all of the debt thrown on the acquired companies is coming due and it could cause another economic disaster, even bring down the economy.

CIT Group (NYSE: CIT) has filed for bankruptcy -- which will lead to the wipeout of the United States taxpayers' $2.3 billion "investment" in the company.

At least, it was billed as an investment at the time, which it was, in the same way that lending your crack junkie cousin beer money is an investment.

"The decision to proceed with our plan of reorganization will allow CIT to continue to provide funding to our small business and middle market customers, two sectors that remain vitally important to the U.S. economy," Jeffrey M. Peek, CIT's Chairman and CEO, said in a statement. "This market-based solution allows CIT to enter into the reorganization process well-prepared and positioned for a swift emergence."

In the past, the government has increased spending and cut taxes to spur spending during times of economic crisis.

However, Uncle Sam is now in so much debt that this is no longer a serious option. And it looks like we are going to spend another $900 billion-plus on health care reform over 10 years (a lot of money, sure, but about a third less than what Wall Street will spend on bonuses).

There's a new day dawning out there. Some analysts are proposing that bankers should be paid in toxic assets. Among the chief proponents of this idea are Vince Farrell of Soleil Securities and Jim Rodgers of Rodgers Holdings.

Now this seems to be a fine idea. The bankers, with their greed and excess speculation, took down our financial system. The U.S. Treasury and the Federal Reserve had to pledge $12.2 trillion of your money to bail out these ... (you finish the sentence as you see fit). Can you imagine what $12.2 trillion is like? Do you have any idea what this money could have done for our country?

The Congressional Oversight Panel reported on Wednesday that most of the $23 billion in taxpayer funds provided to General Motors and Chrysler is unlikely to be repaid. The Congressional Budget Office estimated in June that taxpayers would lose $40 billion of the first $55 billion provided to the auto industry.

The Treasury Department acknowledges that most of the $23 billion provided by the Bush Administration is likely gone forever, but added that there is a "reasonably high probability of the return of most or all of the government funding" provided by the Obama administration.

Bailout coverage has taken on a celebratory tone in recent days as a slew of banks including Goldman Sachs (NYSE: GS) have repaid TARP money, leaving taxpayers with what looks like a handy profit. In addition, equity stakes in Citigroup (NYSE: C) and Bank of America (NYSE: BAC) are sitting on a handsome paper profit.

The only problem is that hundreds of banks have received TARP money. Of course, the most healthy ones are paying it back quickly. The rest are still in limbo, and the result is that the Treasury Department is realizing plenty of gains while all the losses -- investments in companies like American International Group (NYSE: AIG), General Motors, and Chrysler -- remain unrealized and largely ignored.

August 25, 2009. Ben Bernanke is nominated to serve a second term as Federal Reserve Chairman.

August 25, 2009. Ben Bernanke and the Fed are ordered by a federal court to disclose details of their bailout transactions during the financial meltdown last year.

Two reporters from Bloomberg News filed suit in federal court under the Freedom of Information Act and won a case that "ruled against the U.S. Federal Reserve's attempt to block disclosure of companies that participated in and securities covered by a series of emergency financial programs as the global credit crisis began to intensify."

Bloomberg reports that "Citigroup Inc. (NYSE: C), General Motors and four other bailed-out firms subject to U.S. pay reviews cut 2009 lobbying costs 37 percent as pressure mounts from Congress and the public to rein in outsized bonuses, records show."

In a way, it's not so surprising: Now that they've gotten their handouts, they don't need to buy off public officials anymore. But what's appalling is how much -- even after the drop -- taxpayer money these companies used to lobby the government for more gifts.

What happened to the economy in the second quarter? While the numbers show that the contraction in GDP was only 1%, it nevertheless was a negative number.

Here is a breakdown of some key numbers:

• GDP fell 1% in the second quarter after falling 6.4% in the previous quarter.
• Residential investment fell 29.3%, after falling 39.2% in the first quarter.
• Business investment dropped 8.9% after a slide of 39.2% in the first quarter.

Bloomberg reports that "U.S. taxpayers may be on the hook for as much as $23.7 trillion to bail out financial companies, according to Neil Barofsky, special inspector general for the Treasury's Troubled Asset Relief Program."

$23.7 trillion? That's an amount so large that it's almost meaningless. To put it perspective, think of it this way: There are approximately 300 million people in the United States. My dollar store calculator couldn't handle an equation that big so I had to type it into Google but it works out to $79,000 per person.

Not per family or household. Per person. If you have a kindergartner, call him in and explain that he now owes $79,000.

With all the bailout money circulating through the system, the U.S. government is fundamentally altering notions of competition. Mainly, companies that are receiving bailout funds are finding themselves with a distinct competitive advantage.

The Wall Street Journal (subscription required) reports that "Since the onset of the financial crisis nine months ago, the government has become the nation's biggest mortgage lender, guaranteed nearly $3 trillion in money-market mutual-fund assets, commandeered and restructured two car companies, taken equity stakes in nearly 600 banks, lent more than $300 billion to blue-chip companies, supported the life-insurance industry and become a credit source for buyers of cars, tractors and even weapons for hunting ... Increasingly, companies big and small are competing on the basis of their ability to tap government money."

As people work on their taxes, they always look for creative ways to cut their tax bills. Some of our readers think they've got a perfect new write-off -- claiming American International Group, Inc. (NYSE:AIG) as a dependent.

One reader, Rick, wrote, "I hope to keep my job, I still have to provide for my family and AIG. I wonder if I can claim them on this years tax return?"