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July 10, 2008


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John Carney

Since taxpayers will have to make up for any diminished revenue from the Fed, taxpayers are actually "footing the bill" for the Bear bailout.

Look at it this way. If we agree that at the end of our evening out you'll give me any money we have left over after dinner and drinks, I may be concerned when I watch you walk into a casino. The odds are stacked against you and you'll have less money to pay me at the end. In effect, your losses will become mine when the midnight hour strikes.


@ Carney

Appreciate your comment, and while you raise a good point, its not quite applicable here.

Funds deposited by the Fed into the treasury are NOT guaranteed, if in a 'normal' year, budgeteers estimate X contribution and at year-end it turns out to be say, .5X due to interest rate or capital base reductions (or whatever), its the exact same effect. The point is that taxpayers will NOT have to shell out ADDITIONAL monies to make up that shortfall, so your point (while a good story) is irrelevent.

In the end, the Fed (ceteribus paribus) can absorb any losses without asking Mr. and Mrs. Taxpayer for a single penny. The End.

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Not to mention (and someone correct me if I'm wrong),

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