However, there is something we have overlooked in the argument over spending $250 billion to purchase toxic assets: we have already spent $2.4 trillion purchasing toxic assets. While it is still a bad idea to spend another $250 billion doing this, it would actually only increase the price tag by 10%:
It gets worse. While Washington debates TARP II, the Federal Reserve Board continues to buy or guarantee or provide loans for a vast and growing pile of questionable financial and corporate assets, much of which are likely to be worth far less than the Fed has paid or guaranteed or accepted as collateral. We're talking big money here -- so far over $2.4 trillion. (The entire TARP -- parts I and II -- in combination with the proposed stimulus package come to just over $1.5 trillion.)
Taxpayers are on the hook for this Fed bailout money, too, of course. We have to pay the interest on the ever-growing debt used to make these payments or guarantees and loans. Yet while TARP II and the upcoming stimulus package are receiving a great deal of attention, this much larger public commitment by the Fed is not. That's partly because the media doesn't much of understand it, but also because the Fed is doing it in secret, using provisions of its charter never before utilized, and avoiding discussion before the full Board of Governors for fear such meetings would be subject to the Freedom of Information Act.
In other words, the "bad bank" has already been formed. The Shitpile has already been purchased. We have already traded cash for trash. The deed is already done.
Upon reflection, perhaps it was unfair to compare the Federal Reserve and the Treasury Department to The Joker. I mean, at least The Joker only burned his half of the money, and basically owned the other gangs even afterward.
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