With Congress on the eve of passing a historic bill that would give the Treasury a blank check to lend money to Fannie Mae and Freddie Mac, it’s worth looking at how much money the government has already pumped into the system during the housing crisis.

The numbers are staggering and likely to get much larger. What we have here is, through a variety of programs, a stealth bailout where more than a trillion dollars of taxpayer guarantees have been extended to the housing market, both to keep it going and to clean up the mess from the past.

I looked at the changes over the past year to the balance sheets of four governmental and quasi-governmental agencies—the Federal Reserve, the Federal Home Loan Banks, the Federal Housing Administration and Fannie Mae and Freddie Mac. The objective was to see how much additional financing they have provided to the housing market. The total: $1.43 trillion.

I’ll walk you through the numbers in a minute, but it’s worth pointing out this is not an actual expenditure of taxpayer money—not yet anyway. It’s a tally of how much financing those organizations have put out into the marketplace that's largely related to the housing crisis. The costs to the taxpayer will be directly related to how bad the housing crisis gets from here, how much of a buffer in the way of capital these organizations have to absorb losses, and how good their underwriting is for the new loans or collateral. Which is to say: We can count the exposure, but we can’t yet tally the losses.

The Fed: $446 billion

A simple way to look at how much financing the Fed has pumped into the housing market is to look at the change in the weekly balance sheet. What you’ll see immediately is that the total amount of Treasurys on its books has fallen by $311 billion compared with a year ago. This has been replaced by $150 billion in collateral from the Fed’s Term Auction Facilities, in which it is taking in a variety of collateral, much of which is presumed to be housing-related. Another $29 billion is on its books in the form of collateral from Bear Stearns, which greased the wheels of that firm's buyout by JPMorgan Chase Add to that $14 billion in discount window lending to banks and $88 billion in repurchase agreements, which the Fed has always done, but not in such great amounts or for such periods. These repos are now from 15 to 90 days. There’s another $65 billion in swap lines to the European and Swiss central banks that designed to allow European banks to borrow dollars and finance their illiquid assets.

We should also count the $100 billion of Treasurys the Fed loans out through another new facility designed to pump liquidity into the market. Through that system, the Fed loans Treasurys and takes in collateral—again, some of it housing-related. The Fed doesn’t debit its Treasury line item for this because it says it’s only loaning out the securities, but those loans are backed up, in part, by a variety of assets, including some from housing.

So the total for how much new financing the Fed has made available to markets: $446 billion.

Fed officials have said they've never lost a penny on such lending in the past and they deal only with sound financial institutions. (If you’re not sound, you can’t borrow from the Fed, and staying current with the Fed is a good way to stay sound.) They add that they have protection through haircuts or discounts, so that $100 of bonds could get only $95 of financing. In addition, to some extent, as the Fed has made more financing available to real estate-related securities, it’s made less financing available elsewhere. But overall, it’s opened up the spigots to finance real estate in a big way.

Note that the Fed won’t provide values of the types of collateral it holds against its loans.

Federal Home Loan Banks: $274 billion

This is an easier calculation than for the Fed. The 12 Home Loan Banks provide financing to its 8,000-plus banks that, in turn, is used to fund mortgages. The amount of what FHLB calls “advances” to member banks has risen by $274 billion, to stand at $914 billion for the second quarter of 2008.

The FHLBs say existing capital and member banks will absorb losses if they occur. But there is an implicit government guarantee, on that Treasury Secretary Henry Paulson reiterated recently. The legislation in front of Congress allows Treasury to increase lending to FHLB.

Fannie Mae and Freddie Mac: $621 billion

Another easy calculation. Just go look at the balance sheets of Fannie and Freddie and look at the increase in outstanding mortgage-backed securities. That number tells you how much more mortgage guarantees the two giants have out there. Combined, the figure is up by $582 billion. Add in a $39 billion increase in Fannie Mae’s portfolio to get to $621 billion. But note that this is comparing 2007 with 2006. The numbers are almost certainly larger now.

Federal Housing Administration: $90 billion

Officials there tell me they have added $90 billion or so of insured loans since October. Moreover, they have added loans from people they formerly did not lend to: Now they're doing refinancings and funding delinquent borrowers, folks they previously wouldn't deal with.

They say the phone is ringing off the hook as subprime borrowers look to FHA to help them get out of onerous loans. This is a place where there could be real losses, and where losses are expected to grow. The legislation in front of Congress authorizes up to $300 billion of FHA lending.

 I can't stand the thought of the general public paying for the sins of the big boys

it's call PRIVATIZING PROFITS, SOCIALIZING LOSSES

I concur with you Podstock.....it will never be realized how much profiteering is going on with the big boys....

Yes, I totally agree with podstock.

In general I agree -- the banks should be responsible for their own misguided loans.  The problem is that the banks are all in competition, meaning they all had to one-up eachother durring the hayday.  If one bank said "NO" to a subprime borrower, another bank was waiting in line to say "YES".  It really didn't matter which bank approved the loan -- one of them eventually would.  So, when the economy started getting worse and the ARM's started going up, and people started defaulting, and now the banks are in trouble.  As we have pointed out, lots of people got filthy rich by cutting loans to subprime borrowers, but what's done is done; hind-sight is 20:20, and the banks are still in trouble.

A bank going out of business is really bad for everybody.  It sends the message to the general population that the dollar is worthless, and there ends up being panics, and runs on other banks, compounding the problem.  This is one reason why all banks are insurred by the FDIC.  A bank can't simply go out of business.

So We The People have to help out.  Obviously it'd be better if those who took the risk in the first place were the only ones to suffer loss, but the problem is such that the global economy would be in much worse state if that were the case.

Now with that said, *I* want to see more oversight in the future.  The bailout is, in general, good for the economy and the country, but we also need some way to prevent a reoccurance.  What say you all?

karand:

The numbers are staggering and likely to get much larger. What we have here is, through a variety of programs, a stealth bailout where more than a trillion dollars of taxpayer guarantees have been extended to the housing market, both to keep it going and to clean up the mess from the past.

I looked at the changes over the past year to the balance sheets of four governmental and quasi-governmental agencies—the Federal Reserve, the Federal Home Loan Banks, the Federal Housing Administration and Fannie Mae and Freddie Mac. The objective was to see how much additional financing they have provided to the housing market. The total: $1.43 trillion.

I’ll walk you through . . .

It all sounds so negative karand. What we fail to recognize in this whole thing is that there is a simple militaristic solution. I'll walk you through it . . . 

The U.S. airforce can simply mobilize every available bomber in it's arsenal and conduct a single raid over every major city in the country, releasing enormous quantities of pixie dust in their wakes. It would fix the economic problem and provide great training for the aircrews and support staff. 

You see, we just need to think outside the box. 

 This is prez Bush ( also referred to as the chimp ) last few months in office, I see this as a parting gift to all those that helped him ruin this country.

The reason he and the republicans provided so much is after he's gone they'll need all that money for lawyers or leaving the country.

Thanks for the info.

mrsturtz- you are very much going to the wrong place when you say you want more oversight.  There already was and is oversight that has and did nothing at all.  The whole idea that more of a bad idea can fix the wrongs accomplished by the original wrecking crew is absurd.  It is like throwing gas on a fire you're trying to put out.  No the best way to deal with this complete ripping off of the American public is to let those banks fall on their faces and have theri assets bought up at fire sale prices by those left standing.  It is called the free market and had always worked better and more efficiently the less gov't. intrusion and regulation there is.  When is the last time ANY and I mean ANY gov't. agency did not overspend, did ask for less in budget dollars, did not have problems with their budget being short, did something internal to reduce confusion, did something to make the process of dealing with that agency less confusing, did anything that only benefitted people not associated with the gov't., and the list goes on and on with the negative aspects that result when gov't. intervenes in the markets, housing, schools, transportation, energy, all of it.  That is why the founders and framers of our country set it up to exclude the federal gov't. from all but the basics of defending our borders, minting money( that is backed by silver or gold only), treasonous acts, and international commerce.  They have only caused more and more problems with ANY thing they get their greedy grubby paws into.  This is proven time and time again every day I turn the news on.  Most recent the scams of the Senator from Alaska.  If they are given more monopoly powers to regulate and such what do you think it will accomplish?  I can tell you it will not make any problems be resolved or any new ones from happening because the only thing ever done is they will form committees and sub-committees and oversight panels etc. to do one thing.  To do studies and to make up reports to hand in for the Congress and Senate to mullover and in the end do nothing but print more money to throw at the problem.  Only devalueing the dollar more and at the same time any new regulations that had been born from the original problem will have created agencies to do one thing, levy fines against those companies and individuals that will only be paid to the gov't. thereby stealing even more from the people in another round about way.  You put those companies out of business that are being fined to non existence by an agency that has too much oversight and thus create less competition in the marketplace that in turn allows the remaining businesses to increase their selling price due to more demand.  No sir, the only thing that any more gov't. intrusion and regulation does or did is to increase the size of the gov't. and to end up costing taxpayers more of their EARNED money.  I say EARNED because every cent the gov't. steals is just that, not earned but stolen.  Write-in Ron Paul this November 4th to end the governments collaborative effort to rip us off and destroy the middle class.  Join hundreds of thousands of other American citizens who are sick and tired of the same old political lies year after year on anything they speak about.  We all know they say one thing and then do another once elected.  Vote for the only man who has NEVER acted that way.  Don't believe me?  Google Ron Paul and see for yourself his voting records and his position on everything and see that his position has not changed with the direction of the wind.  An independent Ron Paul supporters group has leased the Target Center in Minnesota at the same time the Republican National Convention and has already sold over half the seating, the majority of which was bought in two days.  Just think how many people in every big city across America are going to write-in Ron Paul because of gov't's. inept and over intrusive as well as unconstitutional acts, laws etc. they have illegaly enacted to do one thing.  Increase the gov't size and the taxpayers burden.  Vote all incumbents out too where it is an option.

karand- great piece.  Just thought I'd add that the blank check in the amount of 300 billion for 400,000 homes that are suposedly in trouble works out to $750,000.00 per house.  This is clearly a huge scheme to do one thing, rip off the taxpayers of more of their hard earned as opposed to gov'ts. unearned stolen dollars.  Who in the heck deserves $750,000 for a loan in trouble?  That much money should be enough to buy those houses outright.  Does anyone else see this major ripping off of the taxpayers?  More than half of this money will more than likely never even come anywhere near a payoff for someones house.  It will be too easy for the banks to funnel it back to the lawmakers and to their own slush accounts.  $750,000 per house and that is counting only the latest 300 Billion dollars thrown at the banks.  300 billion.  300 billion in one toss.  Man this really pisses me off.  All caused by the government agencies formed to prevent this sort of thing from happening.  Thieves the entire lot of them.  You know what they did to thieves back in the day?  We need to start using that method of regulation punishment again.

 yep, I agree

and the sad part is, everyone who faithfully paid their mortgages are now paying for the ones who speculated and/or were gambling that housing goes up forever