Bailout's '$700 Billion' Cost Is a Contrived Wild Guess; Media Mostly Ignores

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By Tom Blumer (Bio | Archive)
September 29, 2008 - 14:35 ET
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As I write this on Monday afternoon, the People's House has rejected "the $700 billion bailout."

You won't believe, unless you're a very experienced cynic, where that $700 billion figure came from.

The answer appears to be "out of nowhere."

With no basis.

I'm not kidding.

Here's the evidence, carried six whole days ago at Forbes (HT LAT's Top of the Ticket Blog via BizzyBlog commenter Dan Scott):

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..... The committee's top Republican, Alabama Sen. Richard Shelby, says he's concerned about its cost and whether it will even work.

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

My guess is that the person just quoted, if discovered, might be better known today as a "former Treasury spokesman."

It doesn't seem like a wild stretch to suggest that there is a whiff of blackmail in the figure Treasury decided to use (i.e. "How big does it have to be to get them to do what we want?").

This is serious stuff ..... right?

Yet the press coverage of this quote, admittedly unattributed (not that it's stopped the press before), is very light. Further, though I may have missed it, I haven't seen anyone challenge Paulson, or Bernanke, or Bush about the validity of the $700 billion figure.

The New York Times has not reported it (search is on "particular data point" in quotes) in its regular news coverage. It is mentioned at the Times's Freakonomics blog -- in a comment.

The same search at Google News at about 3:00 p.m. ET returned 61 items (not 66, as claimed on the first page). Almost all are local TV stations, relatively minor publications, or right-leaning blogs. I saw not major Old Media outlet.

Although many of those TV items indicated that the Associated Press had a hand in their reports a 7-day search at the home page of ap.org came up empty, even typing "particular data point" without quotes.

I daresay if most Americans knew of the Treasury person's quote, the communication lines in Washington would melt down. How can this possibly not be important?

Cross-posted at BizzyBlog.com.

—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters


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REJECTED

September 29, 2008 - 14:49 ET by Delsa

THANK GOD AND THOSE WHO VOTED AGAINST!

The Dems want to blame Republicans BUT the Dems have the power in that they and ONLY they have the MAJORITY!

Nancy needs to look at where SHE could have gotten the VOTES SHE NEEDED!

90 PLUS Dems VOTED AGAINST! THEY ARE THE MAJORITY.

SO WHAT WENT WRONG NANCY et al?????

---

September 29, 2008 - 14:59 ET by KJ_sez

Were this not an election year, the Dims would have sailed it right through without so much as a debate. What a sorry bunch they are, that the correct thing to do only gets done so they can hang on their pathetic, aimless, and utterly misused little piece of power for another term.

I demand real change - force a Democrat to speak the truth!

While you all at NB are

September 29, 2008 - 16:21 ET by jdhawk

While you all at NB are sitting around pointing fingers at somebody or anybody, I have a number for you $800 billion. 

The above number is $100 billion more than the bail out may cost off of us.  That is what Americans, you know those us cats, lost in the stock market in a single day - today.

I presume that you all at NB make money from the advertisements that you sell on this web site.  If you look at Google's stock today, that's how they make a living as well, you will see what your future receipts are going to look like as reflected in their stock price.

At some point, you all at NB have to educate your readership.  The Congress needs encouragement to act not who did what to whom and when.  Unlike the great depression, where they didn't act until there was great harm on main street, we have a chance to get ahead of this.

Time is of the essence.  I urge all of you on this web site to write, e-mail, or call your representatives and tell them to get behind this bail out and get it passed.

Oh, by the way, even if this passes, we still have a recession to get through.  Yeah, a recession, but not a depression.  There's a difference.   

»→ Sorry jdhawk

September 29, 2008 - 16:32 ET by Cool Arrow

But you're not describing what happened to me.

I sold everything Thursday at a profit, watched my target stock lose 3.6% today, and bought it back at market close.  It's up 1.2% after hours.

If you're not making money on the volatility, you really are riding an emotionally draining rollercoaster.

Today was an absolute blast for me.

"I've got a bracelet too" - Barack Obama

Stock price only matters

September 29, 2008 - 16:53 ET by Dan The Man 2

Stock price only matters when you buy or sell them, of course not on margin.  They will go up again just as they will fall again.

Nuke em til they glow then shoot em in the dark.

proposal wouldn't solve anything, would just put us in debt

September 29, 2008 - 18:10 ET by Ten7s

The proposal might buy a few weeks, at most months, but it wouldn't solve anything.  Eventually these 'toxic assets' have to be flushed out of the system, and there are many times the amount proposed by Paulson. Thus, in short order, we'd find ourselves with the same problems plus we'd be in greater debt.

There are other strategies that would be effective in shortening the recession.  For instance the firms that can't recover from these bad debts could and should be restructured.  It would wipe out the stockholders, but essentially they're the ones (through their agents, i.e. management) that gambled on ever increasing leverage.  Then let the stockholders sue their agents for failing to look after the best interests of the companies.  That would also take care of the "excessive compensation" that the CEOs and managers received while committing this fraud.

Please pardon me...

September 29, 2008 - 17:47 ET by ontheright

...as I may be much too naive; but regardless where the final "bail out" number ends up - who is going to bail out those of us who are doing the bailing out (legal, tax paying citizens)?

I, along with millions of other legal, tax paying citizens go to work, make ALL our payments - always on time, pay our personal taxes, give to charities, volunteer our time, run small businesses, hire employees, pay our corporate taxes, contribute to society as a whole, teach our children faith-based morality, etc. etc. -

Who is going to bail us out???  

only worsen

September 29, 2008 - 18:21 ET by Ten7s

No one!  It will only worsen the problem, put us in a deeper hole and give the fraudsters a little time.  We need a solution, but one that will work.  And if anyone has to pay, aside from the pain everyone will feel from the recession, then it should be the principals involved with the firms that created these fraudulent securities.