Treasury Sells More Debt: The Consequence Of Bailouts
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-Wednesday, September 17, 2008
Posted by: Eric Ames
100 dollar billsAll the news is awash this morning talking about the AIG bailout while an equally important story is seemingly being overlooked. Reuters published a story this morning called, “Treasury Selling debt to help Fed.” “Treasury said it is selling $40 billion of cash management bills -- essentially a fresh batch of debt -- on Wednesday at the U.S. central bank's request as part of what a Treasury official called an attempt to ‘help them better manage their balance sheet,’" according to the article. Unfortunately, it seems that people are forgetting that someone has to pay for these bailouts. This $85 billion to rescue AIG has to come from somewhere, and it appears that it will come in the form of more debt for the U.S. government. Combine this with Freddie and Fannie, and we are looking at a lot of new debt, in addition to the already swelling deficit. “Between the $29 billion the Fed pledged to swing the Bear Stearns sale to JPMorgan in March, $100 billion apiece to rescue mortgage finance firms Fannie Mae and Freddie Mac, up to $300 billion for the Federal Housing Authority, Tuesday's $85 billion loan to insurer AIG and various other rescue deals and loans, taxpayers are potentially on the hook for more than $900 billion,” according to Reuters. I don’t know who in their right mind would want to lend money to the U.S. right now, but thankfully there are people and governments out there doing just that. How much longer they will be willing to do so remains to be seen, but each new bailout and each new economic problem has to be getting us closer to that time when no one will lend to us.
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