the LYNCH report

The US Senate is set to pass a so-called “bailout bill” that amounts to $838 billion. To give that some sort of perspective, you’d have to spend a million dollars a day for two thousand, two hundred and ninety-five years to spend an equivalent amount. Of course, that doesn’t include the interest which will accrue on that staggering debt.

How will this gigantic tab be paid? It’ll by paid by the US taxpayer: $6,2,36 per taxpayer, to be precise. That, of course, is on top of the $13,500 each taxpayer is already on the hook for via the original TARP money, the bailout of AIG, Lehman, et al. New total: $19,736 for each and every taxpayer, on average, plus interest.

There’s an additional downside: money invested in the government bonds to subsidize this massive spending is, of course, money which will not be otherwise invested in the economy for such things as actually spurring economic growth: for every dollar invested in a government bond, there’s one less dollar available for private companies looking to grow and expand.

The total amount borrowed for “bailout” spending to date? $2,651,797,108,408.

The Globe and Mail reports¹ the total cost of a so-called bailout of the “Big Three” by the Canadian government, which has committed to 20% of the US government bailout, to ultimately cost Canadians between $15 billion and $25 billion.

What’s that mean for the individual Canadian taxpayer?

According to Statistics Canada, there were 9,275,765 full-year, full-time earners as of 2005². That’s a pretty good proxy for the number of income taxpayers. So, let’s take the conservative figure of a bailout cost of $15 billion. That puts each full-year, full-time worker in Canada on the hook for $1,617.

Of course, if you personally believe in supporting the “Big Three”, there’s nothing preventing you from voluntarily using $1,617 of your income to either buy their products or their shares. Unfortunately, the government’s bailout proposal removes that choice from the taxpayer and forces the issue, whether any individual agrees with spending $1,617 of their income to support three private companies or not (and would perhaps prefer to spend $1,617 of their hard-earned money to bail themselves out instead)…

Here’s a copy of Roll Call 690 – Auto Industry Financing and Restructuring Act. This lists how every member of the House voted on the bailout legislation.

Auto Bailout Votes – House

The US Federal Reserve has committed yet more money to the so-called “bailout” of the US economy – this despite no hard evidence that credit markets are, in fact, tightening (as we reported here). $800,000,000,000. more.

According to Bloomberg¹, $600 bn will be used to purchase toxic assets of Freddie, Fannie et al., the very entities without whose existence the housing slump could not have occurred.

Another $200 bn will go to “support” consumer and small-business loans.

What does that mean for the beleaguered US taxpayers? Well, as we previously wrote, the original $700 bn TARP package, coupled with the attempted bailouts of Bear Stearns and AIG, already had taxpayers on the hook for $7,546 each. This adds another $5,954 to each taxpayer’s obligation, for a grand total (to date) of a staggering $13,500.

That’s a bill which, of course, will come due for taxpayer at some later date. There are no reports of any discussions on that part of the equation…

Every day, at least since early September, we’ve heard a barrage of commentators, “experts”, talking heads and pundits expound on the “credit crisis”. Credit has dried up, we’re told. Companies cannot get financing. Banks refuse to lend to each other. The rhetoric has been used as justification for everything from the “bailout” packages (at a cost of $7,546 per taxpayer, and counting…) to the nationalization of insurance companies and, coming soon, automobile manufacturers.

But has credit actually dried up? What does the hard data tell us?

Well, according to data produced by the US Federal Reserve, lending activity does not appear to be slowing down. In fact, quite the contrary: commercial and industrial loans are up. So are consumer loans. We’re told banks are terrified of lending to one another for fear the borrower will collapse before the loan is repaid, however interbank lending shows no ill-effects of the so-called “crisis”.

Of course, such statistics aren’t cited by the vested interests currently in Washington, arms outstretched.

Consumer loans, Oct 24, 2007 - Oct 22, 2008

Commercial and industrial loans, Oct. 24, 2007 - Oct. 22, 2008

Interbank loans, Oct. 24, 2007 - Oct. 22, 2008

There hasn’t been much news from Canada in light of the global financial crisis, or at least not much widely-reported news.

In fact, Canada’s banking sector is hardly immune to the global credit tightening and the sub-prime-triggered crisis.

Here, then, is an overview of recent events in Canada:

• The TSX’s S&P Index is down over 10% in just four days.
• Bloomberg reports RBC’s Asset Management clients have withdrawn $1.2bn in the past month.
• Also from Bloomberg, TD saw $1.15bn redeemed in September.
• The Bank of Canada has injected $20bn into money markets to ease liquidity concerns among Canada’s banks.
• The Bank of Canada has also agreed to accept ABCPs – the Asset Backed Commercial Paper at the heart of the crisis – as collateral on a temporary basis.
• The average price of a home in Toronto dropped 6% in September, while the number of sales are down 11%, according to a report in the National Post. The number of homes listed for sale is up 19%.
• In Vancouver, meanwhile, the number of home sales declined a whopping 42.9% in September, versus a year ago, according to a report on CBC.
• The number of new Vancouver listings rose 28.8%.
• The “benchmark” price of a detached home has falled 5.8% since May in Vancouver, while the “benchmark” price of a condo fell 5.2%.

Get ready for an interesting Monday in the world of share prices.

Despite the high hopes attached to the US government’s various bailouts (so far totalling around $1,014,000,000,000, or about $7,546 per taxpayer, as we wrote in a previous article), the world’s markets continue to drop.

Asian markets are uniformly down, and signficantly – here’s a glimpse of Asia’s markets as at 5:50am eastern:

Asian markets as at 5:50am eastern, Monday Oct. 6, 2008

The situation is much the same in Europe. Again, courtesy Yahoo, and also as at 5:50am eastern:

European markets follow suit. Also as of 5:50am eastern, Monday Oct 6, 2008

The herd psychology appears to be in full swing, with a wholesale migration out of the markets.

Hold tight for a bumpy ride: the more governments throughout the world bailout failing banks/insurers/etc., the more the taxpayers (read: consumers) get burdened with debt, and the farther away a recovery becomes…

Here’s the complete list of the members of Congress who voted in favor of the bailout bill:

Roll Call for Bailout Bill Vote

FINAL VOTE RESULTS FOR ROLL CALL 681

(Democrats in roman; Republicans in italic; Independents underlined)
H R 1424 YEA-AND-NAY      3-Oct-2008      1:22 PM
QUESTION: On Motion to Concur in Senate Amendments
BILL TITLE: Emergency Economic Stabilization Act of 2008

—- YEAS    263 —

—- NAYS    171 —

As we previously wrote, the current crisis in the financial markets could not have happened without Freddie Mac and Fannie Mae: by guaranteeing undocumented, high-risk mortgages, Freddie and Fannie made investments in the mortgages a sure things for Wall Street.

Now, the New York Times has published an excellent background article on how Freddie and Fannie got into the position whereby they were guaranteeing these mortgages, and the fingers point to the usual suspects: with Democrats pushing Freddie and Fannie to insure ever riskier loans, under the guise of “helping” low-income, minority and high-risk applicants on one hand, and Wall Street pushing Freddie and Fannie to do the same, thereby enhancing Wall Street’s profits, the US taxpayer never stood a chance.

This could never have happened in a free market. In such a market, Freddie and Fannie would have been forced to charge insurance premiums commensurate with the risks they were assuming, not on the basis of some sort of “altruistic”, government-induced charity mission. Investors in the mortgage bundles guaranteed by Freddie and Fannie would have likewise been forced to scrutinize Freddie’s and Fannie’s ability to take on such risks. As it was, it was essentially known the government would back up Freddie and Fannie. That removed any risk to investors.

The article cites Democrats such as Barney Frank of Massachusetts and Frank Reed of Rhode Island encouraging Freddie and Fannie to take on ever more risky mortgages to support their ideological goals.

The Bush White House, which has shown itself to be more Democratic than any Democratic White House since Roosevelt (as measured by government interventionism in the economy and growth of government spending), made matters worse, by changing the lending standards applied to Freddie and Fannie, thereby allowing them to take on an additional $40 billion in sub-prime loans.

The lenders, meanwhile, threatened to take their business elsewhere unless Freddie and Fannie took ever more risky mortgages off the lenders’ books.

You can find the excellent New York Times article here.

Among all the drama on TV and in newspapers about credit “disappearing”, all in support of a taxpayer financed bailout, here’s a look at some of the actual numbers, courtesy forbes.com:

U.S. Bank Loans (Billions of Dollars)

As you can see, consumer lending is still going strong, business lending actually increased and even real estate lending is significantly up over last year.

While it makes for good ratings and sells newspapers and serves as a convenient excuse for the growth of governmental economic interventionism, in reality the numbers don’t show any crisis.

You can see the source article here.