Governmental Facts and Figures from the Financial Crisis.
A short summary of the economic history of the past few months is grim.
- Credit, when it is available, has become dramatically more expensive for all borrowers, and some worry it will get even more expensive in 2009.
- U.S. stock markets have lost more than 40% of their value over the past year, and markets elsewhere in the world have also declined sharply.
- In September, the federal government took control of the two largest mortgage financing intermediaries, generally known as Fannie Mae and Freddie Mac.
- All three major U.S. - based auto companies have told Congress they face the threat of imminent bankruptcy.
- The largest U.S. commercial bank, Citigroup, and the largest U.S. insurance company, AIG, have both received substantial infusions of capital from the U.S. government, with AIG under threat of imminent bankrupcty.
- Two major investment banks, Bear Sterns and Merrill Lynch, have disappeared in mergers. One major investment bank, Lehman Brothers, has filed for protection under the bankruptcy laws. The two largest remaining investment banks, Goldman Sachs and Morgan Stanley, have transformed themselves into bank holding companies.
- The largest thrift savings banks, Washinton Mutual and IndyMac, have been taken over by their regulator.
- The Federal Deposit Insurance Corporation has placed 171 banks, with combined assets of $116 billion, on the problem list as of September 30, 2008.
In response to the financial crisis, Congress passed the Emergency Economic Stabilization Act of 2008, authorizing the Treasury Department to commit up to $250 billion in taxpayer dollars, to be followed by another $100 billion and another $350 billion if warranted. The statute also created a Congressional Oversight Panel. The Act’s purposes are to “restore liquidity and stability to the financial system of the United States…in a manner that (A) protects home values, college funds, retirement accounts, and life savings; (B) preserves homeownership and promotes jobs and economic growth; (C) promotes overall returns to the taxpayers of the United States; and (D) provides public accountability.”
From the passage of the Emergency Economic Stabilization Act of 2008 to the present date, Treasury has used its authority under the Act to provide 87 banks with $165 billion in exchange for preferred stock and warrants. Treasury further used its authority to provide AIG with $40 billion in exchange for preferred stock and warrants, and to provide Citigroup with a further $20 billion in preferred stock and warrants. As part of a program to guarantee approximately $306 billion in Citigroup’s troubled assets, Treasury receives $4 billion of Citigroup preferred stock and warrants. Together, these disbursements constitute approximately $1900 per family, or almost 3% of the typical family’s pre-tax income.
This is not the full extent of the federal government’s actions to date. For the original report please link to: http://cop.senate.gov/documents/cop-121008-report.pdf
"Greg Gilbert and James Simos" are registered representatives of FINRA member firm, "Infinity Financial Services."
