What is the "Bill" So Far?

In a comment to a previous post, reader obloodyhell made this point (among others):

One thing to realize -- 700 billion sounds like a hell of a lot -- but, at least up until a couple months ago -- it was about 20 days output for the nation.

Not to attack OBH, [ at least not now ;) ], but simply to note: if only it were just $700 Billion.

The $700 Billion is just the Emergency Economic Stability Act - aka "The Swindlers Bailout Act of 2008" - and as I understand it, this amount can rise to $1 Trillion ( and that ignores the $150 Billion of pure pork the Senate added to this obscenity).

There are other huge amounts of "money" which can come to sorrow. How these overlap with bailout funds is unclear, but this still represents the destruction of money, via default of debt, on an enormous scale.

They are:

It is also the $700 Billion or more that the FHLB has "loaned" out using dodgy mortgages or mortgage securities as collateral.

It is also the $1.5 Trillion expansion of the FRB's balance sheet based on unknown collateral, most likely with a smaller "hair-cut" than used by FHLB. The FRB refuses to disclose what this collateral is. This is predicted to reach $3 Trillion by the end of this year.

It is also the $40 Billion per month of toxic sludge that Fannie and Freddie are now committed to buying, going forward. This has some overlap with other categories, but transfers the problem directly to taxpayers, and explicitly targets bad debt.

It is worth noting that the horrible lending practices that were evident in the residential mortgage markets also prevailed in Commercial Real Estate, auto loans and credit card debt. Through various means, including the feedback loops with the real economy, these are already playing a part.

Finally, back to the original black hole for money, see this chart:

(Click image for a larger image in a new window.)

This shows that we have another 2 years of hell at least. All the "Option adjustable rate" loans will probably difault due to the extreme toxicity of these loans (when they "recast", monthly payments can explode by 60%). (The recasts will not happen at the exact time of the resets shown above, but will not be too out of line with them for many of these.) All the other categories will see significant default rates as well, as the represent vintages for which the underwriting standards were truly hideous.