Place your bets here
OK, let's start placing bets about how much this Fannie/Freddie bailout is really going to cost.
But before you chime in down in the comments section, let's revisit a bit of history: When the credit markets seized up in August of last year, forecasts began issuing from the lips and laser printers of analysts about the total amount of losses and write-downs that would ensue. The most common figure cited at the time was $200 billion.
We're already up to $507 billion as of this weekend. And the smorgasbord of forecasts compiled by Addison and Ian at the 5 Min. Forecast range from those so low they're already out of date to a high of $2 trillion from Nouriel Roubini.
Now… as far as Fannie and Freddie go, the common figure cited in news coverage this weekend is — shades of deja vu — $200 million! (Cue the Twilight Zone theme.)
But wait… Former St. Louis Fed President William Poole has emerged from his hawk's nest to immediately up that figure to $300 billion. Do I hear $400? $400 billion? $400 billion for this exquisite collection of Fannie and Freddie paper?
And while we're at it, a couple of other miscellaneous questions:
1. Does it seem more ominous now than ever that Hank Paulson is walking away from the Treasury as soon as the election's over, instead of hanging around till Inauguration Day?
2. Anyone find it curious that the Fannie/Freddie bailout coincided with — and overshadowed — the news of a bank failure in Nevada, a bank whose board included John McCain's son? Just askin'.
Sphere: Related Content
WELL, THE RANGE IS IMMENSE, AND COVERS MY GUESS-WHICH IS ABOUT 1.5 TRILLION-
Comment on September 8, 2008 @ 12:10 pm
Fannie and Freddie- when all is said and done
they will outdo the Resolution Trust bailout cost by at least a factor of 5, so…
my prediction is 850 million when the dust clears (no probs, just raise taxes on the “rich” (anyone earning over 65000 now, great political move!!!)
Comment on September 8, 2008 @ 12:11 pm
Every bailout I’ve ever seen was at least a factor of 10 higher that the initial estimate. I’m betting on the 2 trillion number myself.
Comment on September 8, 2008 @ 12:17 pm
1.6 Trillion sounds about right, but they will stir things up, and mix more in, until it will be hard to tell, because it is an ongoing train wreck, and it never will be paid off, because it will destroy the dollar, so the real cost is —A Free America.
Comment on September 8, 2008 @ 12:24 pm
The derivative markets may make the costs incomprehensable A big bank failure(s) is imminent, and then the derivative dominos will expose the size and scope of the mess.
Comment on September 8, 2008 @ 12:39 pm
Being solidly middle class earning under $5 million, I am obviously concerned about all this debt. My best best bet is that Fannie and Freddie will add another half billion to the bailouts. I would put the final all up figure at $2.1 trillion.
Comment on September 8, 2008 @ 12:41 pm
View from the UK.
Answer 1.
Cost to Mr. & Mrs. Average in the USA
US$1 trillion at least.
Answer 2. Wall Street a nice fat profit.
Comment on September 8, 2008 @ 12:42 pm
We’ll never know because by the time the numbers are in, we’ll be on to the next financially engineered crisis.
But for a number — at least $1.3T
Comment on September 8, 2008 @ 12:44 pm
It will be one trillion plus and the sky is the limit.
Comment on September 8, 2008 @ 12:49 pm
The “home owners” must be supported! (Blech!) The figure, not adjusted for either type of “flation” will be beyond $1.77 trillion. Not bad for one day’s work.
Comment on September 8, 2008 @ 1:03 pm
Libertarian Greetings from Bonsall, CA - I’m going to go with the (nominal $$) figure of $800 billion. Inflation - adjusted will of course be higher, how much higher depends on how deep and how prolonged the stagflationary depression will be. Best Regards to all Ron Paul supporters.
Comment on September 8, 2008 @ 1:13 pm
We probably never will know the exact amount. My guess would be near a trillion.
Comment on September 8, 2008 @ 1:13 pm
It doesn’t matter if the Lazarus ressurection of Fannie and Freddie costs 1T or 5T dollars. The econimic destruction of our children’s, children’s futures and hopes is the absolute greatest cost, and will be immeasurable. What do we tell them? Sorry?
Comment on September 8, 2008 @ 1:15 pm
Anyone who believes the American Taxpayer will ever be repaid please contact me as I have a bridge for sale!
Down with bailouts and sticking it to the taxpayer!!
Up with the Constitution and Ron Paul!!!
Comment on September 8, 2008 @ 1:19 pm
Let’s see-
We have nationalized education and the US is not ranked in the top 20 ;if you would like to go to a VA hospital for brain surgery,you will love nationalized health care,and now the Gov’t will rescue us with this FNM bailout.Given the history of the government’s helping hand,I vote a trillion bucks for the cost.
Comment on September 8, 2008 @ 1:20 pm
The backstop also includes the Federal Home Loan Banks. They had $1.34 trillion of alleged assets on 7-1-08 Fannie and Freddie had $2.3 trillion in derivative exposure at the begining of the year.It may have gone up since then. In April they had $5.2 trillion in mortgages.Rough figures of a 30% loss on $9 trillion. $3 trillion if the housing slide stops in less than 6 months.
Comment on September 8, 2008 @ 1:20 pm
Since this holy s_ _ _! is ongoing and the time line to the ending is similar to house training a mut puppy, who knows when the floors will be safe again. As mortgage defaults keep swelling and commercial defaults join into the fun how can we even think about how much this will cost. Welcome to the socialist republic of america and it’s lack of moral hazard and bend over for me greed. Boys and girls it’s gonna be awhile. Thank goodness for monday nite football.
Comment on September 8, 2008 @ 1:29 pm
my first bet: $2 Trillion
my second bet: we will NEVER get a clean accounting of this fiasco
Comment on September 8, 2008 @ 2:06 pm
The american public spends more time on the
NFL than they do congress so they get what
they deserve. Not one person has been brought
up on any misconduct it must be nice. I am
just a regular person and I saw they were giving out money that they shouldn’t. Congress is so tied into all this that its just business as usual and bail them out with
money we don’t have. Worry about the President, congress is the problem.
Comment on September 8, 2008 @ 2:41 pm
The hoser estimates $750 Billion
Comment on September 8, 2008 @ 3:02 pm
I have to go with Larry Shultz and bid $3no Trillion. While some are suggesting only 35% declines in value of about $6T in paper, 2/3rds of the paper is less than 5 years old and will net a loss of more than 35% when cost of foreclosure and carry costs are factored in. I’m suggesting at least a 50% loss of notational value or $3T. It may take several years for the size of the train wreck to become apparent, but the $25B suggested by the Government Budget office will be exposed as a sham this year.
Comment on September 8, 2008 @ 3:03 pm
Very likely the complete collapse of the U.S. dollar since we are following the same path as Germany in 1923 when their paper currency became worth less than the paper itself. Germany printed DMarks to pay reparations, we are now flooding the world with identical “funny money”.
Comment on September 8, 2008 @ 3:24 pm
The amount does not matter. The rest of the world is in worse shape. Don’t forget any amount of money can be printed. Since most Americans are up to their eyeballs in dept and a lot of the dept is held by foreigners just print money,inflation will take care of everything.
On the other hand if you have money, buy gold.
Comment on September 8, 2008 @ 3:29 pm
It will be over 2.5 T…but of course congress is & will be so out of control that we won’t know. And other scams will be added.
Comment on September 8, 2008 @ 4:14 pm
Monoply money! $2.25T The beginning of the end of an empire China has just bought Mayfair etc and has all the cash America has none!!
Comment on September 8, 2008 @ 4:16 pm
Depending on who’s counting and exactly what gets counted, my guess is $1.5 trillion.
Comment on September 8, 2008 @ 4:28 pm
I can’t wait to see what sort of derivatives will be spawned from all this.
Guess? Guess this!
Comment on September 8, 2008 @ 4:38 pm
400 Trillion Dollars
We’re Freakin’ Doomed
Comment on September 8, 2008 @ 5:01 pm
I hate the bail out but what would happen if the bail out did not take place. Do you really think the Chinese, the Suadis and other foreign debt holders would just say “oh well” and that nothing would happen. We would have a collossal melt down of the world financial system. The Great Depression would be a walk in the park by comparison.
Ask yourself “what would happen and then what?” over and over. i.e. No bail out, what would happen and then what would happen next. And then what?
The bail out SUCKS, but what was the alternative?
Comment on September 8, 2008 @ 5:34 pm
I’m new to this, but with everything I have read and heard, my “guess” is 3.5 trillion. That is if I’m still alive when it is all over! (Now, what do I win?, Worthless paper bills?)
Comment on September 8, 2008 @ 5:41 pm
Well I see a lot of guesses here and I will go on record and say that this fiasco will cost us $5 trillion (!) because when the world finally loses confidence in the USD the USD will be worth much less then they are now (I predict a USD index of 40 in 3 to 5 years as well). This will more than double the final costs from the experts 2 billion estimate.
Comment on September 8, 2008 @ 5:57 pm
Has to be at least 50% of the mess - lets say $3 trillion but hey whats a bit of loose change between friends.?
Comment on September 8, 2008 @ 6:05 pm
$100 trillion in the new US Zimbabwe dollar.
Comment on September 8, 2008 @ 6:27 pm
My guess is $3 Trillion +. We will never know the final figure, because it will be hidden so deep in the back offices that our children will not be able find it.
Comment on September 8, 2008 @ 6:34 pm
Aren’t some of the mortages good?
I in 9 bad?
Help me out here…
Bail out wrong but the alternative?????
Cost us 500 billion
Comment on September 8, 2008 @ 6:49 pm
Well with 3 trillion in loans and a guess at 30% failure rate, put me down for a trillion.
How about they go after the CEO and the brokers that wrote the NINJA loans in the first place.
Comment on September 8, 2008 @ 7:15 pm
I believe the cost will be about 2.5 billion ounces of gold. I have no idea what that will be in dollars.
Comment on September 8, 2008 @ 7:20 pm
You guys really don’t get it.
They have a new pool, the derivatives will follow.
Losses? Try 50 trillion. Then guess what happens.
Comment on September 8, 2008 @ 7:21 pm
50 trillion what. My answer of 2.5 billion ounces of gold could end up being even more than 50 trillion dollars (think Zimbabwe).
Comment on September 8, 2008 @ 7:37 pm
duh!
Comment on September 8, 2008 @ 7:41 pm
if this causes the foreign banks and investors to drop or stop us treasuries, and benny and the jets keep pumping money in, and 117 more banks fail, and jp morgan pulls another ‘i dont do that anymore’ and (the unmentional political stuff), and….ad infinitum ad nauseum…$50 000 000 000 000 sounds light.
Comment on September 8, 2008 @ 7:48 pm
Okay, 2.5 billion ounces, educate me–where are they and how do we bring them to bear in the market?
Consider a story, a fairy tale of not disproportionate possibility: A young back office go getter runs some numbers through the company’s main frame and discovers the possibilty that, given certain assumptions, a profit could be made.
Disregarding the liquidity question, put on hold until approval by top management, buried in an appendix and specified in a supplement to same, the odds of success outweigh the risk by a four to one ratio. Outliers within the model make a ten to one profit a reasonable (within the two and one half standard deviations from the mean) possibility (probabilities to follow when approval occurs), senior staff to fine tune the probability.
What else do you need to know?
Make that movie!
Comment on September 8, 2008 @ 7:53 pm
reading from top down i was thinking my $2.5-3.0 trillion number was going to be a little over the top. however, i think it may be way under. i would agree with several above about the unknowable (known unknowns in cheney speak) cost that the collapse of the worldwide derivatives market will be. i see no reason why the fannie/freddie takeover will not be the beginning of that collapse. so, with that said, $6.5 trillion to the u.s.a. and another $6-8 trillion to the remainder of the not yet bankrupt nations. one thing seems to be very clear, we are in for a world of hurt.
Comment on September 8, 2008 @ 7:54 pm
Let’s see, the war in Iraq was originally sold as “maybe” 60 billion. We are approaching 600 billion with no light in the tunnel and 1 trillion plus is likely.
Thus, the “bushie lies factor” would indicate 200 billion times a factor of 16.7 = 3.3 Trillion.
However, FNMA and FDMC hold 5.3 trillion in mortgages. The toxic debt at the bottom of the barrel will rot the remaining loans in the portfolio. I expect real estate values to drop 60 to 70 percent. That would give us losses of 3.5 Trillion.
There you have it …..3.4 Trillion wheelbarrows of worthless dollars.
We’re F*cked !!
The Boards of Directors and CEOs of Fannie & Freddie should be tarred and feathered rather than given the golden parachutes that they got.
Comment on September 8, 2008 @ 11:54 pm
Some of these calculated number seem plausible, especially the Muti-trillion figures. Too many variables are in-play to go with anything put a range of $800 B to $6 T.
I agree we will never know since the data will not be made available.
Comment on September 9, 2008 @ 12:54 am
I expect the figure to be $387 billion by the end March 2010. This will be the final cost of the bail out.
Comment on September 9, 2008 @ 4:22 am
From what I have read, $2.5 trillion dollars looks like a good bet.
Comment on September 9, 2008 @ 5:29 am
What ever it turns out to be, one thing is for sure, it will NEVER be repaid in full. I agree with many others, that the final cost to the overall economy will be unknown, or at least unpublished. The 3T figure sounds like the most accurate estimate, but it is probably a minimum estimate. It is going to cause a chain reaction, that will be impossible to put a figure on, until it is finished.
Comment on September 9, 2008 @ 6:58 am
My guess is about fifty bazillion. That’s right, bazillion with a “b” and a “z”. The truth is it will be nearly impossible to fully calculate the losses the U.S. and world economies will suffer as this debacle will take decades to play out.
Comment on September 9, 2008 @ 10:02 am
Our systems are so corrupt and self-serving now, who knows how this current debacle will turn out. Maybe we’re seeing the beginning of a new party - The American Constitution party - dedicated to preserving America and promoting integrity in government - and the old two-party system will disintegrate. Surely hope so! May God help us!
Comment on September 9, 2008 @ 11:36 am
It will cost more than 2.5 trillion, but it won’t all be counted b/c the govt doesn’t really want us to know. And that will be added to the inflation toll we all will pay…
Comment on September 9, 2008 @ 12:47 pm
To infinity, and beyond!
After all, the dollar is going to zero, duh.
Comment on September 10, 2008 @ 1:54 pm
I figure a nice round NO. between 3 an 5 trillian. Or we could have sold it to the China. ???
Comment on September 10, 2008 @ 7:18 pm
Not to be a contrarian or anything, but I think there is a good possibility that the US taxpayer will end up making a profit from the deal, much like the Chrysler bailout. All it would take is for the 11 month backlog of existing homes to be sold off, and normal immigration, employment, and economic trends to resume their long term upward trends. I think in about 2 years this will all be over, and the underlying value of the homes in trouble will resume their normal long term trends.
Comment on September 16, 2008 @ 12:25 pm
[...] committed for Fannie Mae, Freddie Mac, AIG and Bear Stearns." Funny, there's that $200 billion figure yet again. Feel free to place your own bets in the comments [...]
Pingback on September 19, 2008 @ 8:51 am
[...] Treasury Secretary Hank Paulson promised that money borrowed from the government and taxpayers will be the first to be repaid. Our bloggin’ brother Dave Gonigam has a poll going at The Daily Reckoning blog as to how much this fiasco will really cost… you can cast your vote, here. [...]
Pingback on May 4, 2009 @ 9:59 pm