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BARACK OBAMA AND BEN BERNANKE HAVE COME AROUND TO THE VIEW WE HAVE HELD FOR MONTHS

BARACK OBAMA AND BEN BERNANKE HAVE COME AROUND TO THE VIEW WE HAVE HELD FOR MONTHS

They are admitting that it is going to take a lot more than fiscal stimulus and the already pledged hundreds of billions of bailout dollars to ensure stability in the financial system.   In a speech in London this week, Ben Bernanke said that more capital injections and guarantees are necessary to ensure stability in the financial system.


Obama has called the situation “dire” and his transition team of economic advisors is lobbying hard to get the remaining $350 billion in TARP funds released by Congress.  While Congress angles for increased influence on how this money is spent, Obama and his team are starting to make the case that many more hundreds of billions of taxpayer dollars will be needed to shore up bank balance sheets before the banking system can perform its normal function of lending again.


We have been saying for months that the sooner the banks are recapitalized, the cheaper the total cost will be.  Delaying only increases the clogs in the financial system, and further damages the millions of companies and businesses that are the keys to economic prosperity.  A non-functioning banking system destroys good businesses as well as bad businesses.


Below is an excerpt from CNNMoney.com tracking where the federal bailout money has gone thus far.  The link is: http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/index.html


Who is getting the bank bailout money – CNNMoney.com

SPECIAL REPORT Issue #1: America’s Money Crisis Issue #1: America’s Money Crisis Column Archive

Economy rescue: Adding up the dollars

The government is engaged in an unprecedented – and expensive – effort to rescue the economy. Here are all the elements of the bailouts:

Date                             Bailout                                                 Allocated          Spent

December 2007  Term Auction Facility                                          $1.6 trillion            $1.6 trillion

February 2008     Economic Stimulus Act of 2008                       $168 billion           $168 billion

March 2008          Bear Stearns bailout                                           $29 billion             $29 billion

March 2008          Discount window                                                                 n/a                          $131.9 billion1

May 2008              Student loan guarantees                                   $9 billion                               unknown

September 2008 Fannie Mae and Freddie Mac                           $200 billion           $13.8 billion

September 2008 Foreign exchange dollar swaps                       unlimited               n/a

October 2008       FHA housing rescue                                           $320 billion           unknown

October 2008       Auto industry energy efficiency loans             $25 billion             $0

October 2008       Troubled Asset Relief Program                        $700 billion           $276.3 billion

November 2008  AIG capital investment                                       $40 billion             $40 billion

October 2008       Bank capital investments                                   $250 billion           $192.3 billion

November 2008  Citigroup capital investment                             $20 billion             $20 billion

November 2008  Citigroup loan loss backstop                             $5 billion                               $0

November 2008  TALF loss provisions                                          $20 billion             $0

December 2008  Auto industry bailout                                           $23.4 billion          $14 billion

December 2008  General Motors                                                    $13.4 billion          $4 billion

December 2008  Chrysler                                                                 $4 billion                               $4 billion

December 2008  GMAC                                                                    $6 billion                               $6 billion

October 2008       Money market guarantees                                                $659 billion           unknown

October 2008       Commercial Paper Funding Facility                                $1.4 trillion            $331.7 billion

November 2008  Unemployment benefit extensions                 $8 billion                               $8 billion

November 2008  AIG                                                                         $152.5 billion       $127.7 billion3

November 2008  Treasury capital investment                              $40 billion             $40 billion

November 2008  Bridge loan                                                           $60 billion             $39.5 billion

November 2008  Collateralized debt obligation purchases       $30 billion             $28.2 billion

November 2008  Mortgage-backed securities purchases          $22.5 billion          $20 billion

November 2008  Commercial paper purchases                          $20.9 billion          unknown

November 2008  Citigroup loan-loss backstop                            $300 billion           $0

November 2008  Term Asset-Backed Securities Loan Facility $200 billion           $0

November 2008  GSE mortgage-backed securities purchases                $500 billion           $0

November 2008  GSE debt purchases                                           $100 billion           $0

November 2008  FDIC Temp. Liquidity Guarantee Program    Unlimited              unknown

2008                       FDIC bank takeovers                                          $16.7 billion          $16.7 billion

Total:                                                 $7.2 trillion    $2.7 trillion

Note: Figures as of Jan. 9, 2009

http://money.cnn.com/news/specials/storysupplement/bailout_scorecard/index.html (2 of 2)1/14/2009 8:42:19 AM



The fact is that much of the decision-making power of the financial and banking system now resides in Washington D.C.  Washington usually works at a very different pace than does the marketplace, and businesses trying to operate without a functioning banking system can ill afford to wait.  Delay now will mean a longer and deeper recession/depression and a much bigger capital injection later.  As the old saying goes, a stitch in time saves nine.


Fed Chairman Bernanke, and President-elect Obama are beginning to beat the drum, but should pick up the cadence, and do so immediately.


For no charge, as a service to our readers, we will be happy to examine your current investment portfolio, and explain how we might restructure it to meet your needs for income and capital appreciation in the current environment.  Please give us a call if we can help you in this regard.


Thanks for listening.


Guild Investment Management, Inc., a registered investment advisor.  All material presented herein is believed to be reliable.  Investment recommendations and opinions expressed in these reports may change without prior notice.





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