With $14.3 trillion in wealth gone, what are we getting for our $9.7 trillion?
Since last September, when all the government money went out the door, stock investors around the world have lost $14.3 trillion. For all the talk, if stock markets were rising now, people would not see the need to spend government money and guarantee bad loans. So one way to look at the government money at risk is this: Is it contributing to a rise in the stock market? So far, the answer is "no."
But that has not stopped government from potentially spending or putting at risk $9.7 trillion. Where did that money go?
- $8.7 trillion comes from the Fed, Treasury, and FDIC's cash or guarantees. They've lent or spent $3 trillion and have pledged to put up an additional $5.7 trillion if needed. Only the $700 billion for the TARP and the $168 billion is for tax cuts and rebates approved in 2008 were voted on, the other $8 trillion was "under the authority" of the Fed and the FDIC and its destination has not been reported.
- $780 billion is for the stimulus plan that will likely be voted on this week
Where did all that money go? What are we getting for it? The answers appear to be -- I won't tell you and things would be much worse if we hadn't spent the money.
I bet we can do better than that. For example, we could get lending going again by creating new banks and clean up the toxic waste by letting the FDIC buy bad mortgages. I am not sure if these plans would get the stock market moving up again but I think they would unfreeze the financial markets.
Peter Cohan is President ofPeter S. Cohan & Associates. He also teaches management at Babson College. His eighth book isYou Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.