Most people think that the proposed bailout will cost $700 billion. In fact, it is not limited to $700 big ones, and will probably go much higher.
Specifically, Paulson’s draft bailout plans says:
“The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.”
That means that Paulson could buy a couple hundred billion worth of assets one day, sell them, and then the next day buy another couple hundred billion, and so on.
The maximum price tag?
There is no maximum. Paulson could literally spend unlimited taxpayer monies. And remember that Paulson has already broadened the proposal to include the purchase of non mortgage-related assets (and see this).
As Chris Martenson writes:
This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.
So what happens when you have vague language and an unlimited budget? Fraud and self-dealing. Mark my words, this is the largest looting operation ever in the history of the US, and it’s all spelled out right in this delightfully brief document that is about to be rammed through a scared Congress and made into law.
Indeed, as written, the feds are only limited to $700 billion at a time in mortgage-related assets. But since they can also buy non-mortgage related assets, the $700 billion language may not even apply to other assets.
Update 1: See the final version of the bailout proposal on page 40.
Update 2: A Bloomberg analyst says that the bailout could balloon to $5 trillion dollars.
Update 3: And remember that “in the months before the March 2003 Iraq invasion, the Bush administration estimated the Iraq war would cost no more than $50 billion“, but it will end up costing at least $3 trillion dollars.