Coming Soon: The Bill for the Massive U.S. Debt
Americans could be in for a rude awakening in coming months when they discover the true scope of the massive national debt racked up by the U.S. government.
In fact, the $1.6 trillion deficit expected for 2010, which is above 10% of gross domestic product (GDP), is only the beginning.
Since the current economic crisis began in late 2007, the U.S. Federal Reserve has tripled the size of its balance sheet, creating enormous amounts of new money by lending to hundreds of ailing banks and buying up more than $1 trillion of questionable asset-backed securities.
But that's only a small part of the story. Since the beginning of the crisis, the Fed has lent, spent, or guaranteed $11.6 trillion, including underwriting the entire system of mortgage finance in the United States, a system that currently shows a nearly $1 trillion loss.
Investment News Briefs
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Fannie, Freddie Get Blank Checks; Holiday Retail Sales Rise 3.6%; Fed to Banks: Set Up CDs with Us; Health Care Bill Likely to Resemble Senate Version; JPMorgan Sues Former Bank Exec; Oil Tops $79 for First Time in Four Weeks
- In what's been called a "perplexing" move by one analyst, the U.S. Treasury lifted a $200 billion cap on the amount of taxpayer dollars that can be injected into ailing mortgage firms Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) , providing unlimited support to them. The Treasury put into $60 billion into Fannie and $51 billion into Freddie, and were unlikely to need more than the $200 billion cap, wrote Keefe, Bruyette & Woods Inc. analyst Bose George in a note to investors yesterday (Monday). George views the Treasury's move as a way to more aggressively prop the U.S. housing market, and said the government could step up efforts of its Home Affordable Modification Program (HAMP), a mortgage-modification program designed for homeowners who can no longer afford them. But so far, HAMP and other government props have failed to stop a continuing wave of foreclosures, as Money Morning reported last fall. Shares of the firms, both government-sponsored enterprises (GSE) skyrocketed in trading yesterday. Fannie was up 20.95% to close at $1.27, while Freddie gained 26.98% to close at $1.60.
What the Government Isn't Telling You About the New Healthcare Bill
In a vote that was held at 1 a.m. Monday, the Senate approved a procedural measure that makes it likely a version of the national healthcare bill will make it into law.
In fact, by taking advantage of an obscure rule that allowed lawmakers to start their day and vote on the measure well before dawn, Senate leaders were able to approve the measure and keep alive the possibility that the healthcare bill will be passed by Christmas.
But if you study the Senate bill carefully - no matter what your political persuasion may be - you have to wonder why they even bothered.
Senate Healthcare Bill Headed for Christmas Eve Vote Without Public Option
Shares of health insurers and pharmaceutical companies gained yesterday (Monday) after a new version of the Senate's healthcare reform bill eliminated the so-called public option. But it's the next few weeks on Capitol Hill that will determine the long-term effects that Congressional reforms will have on health-related sectors.
As one of the worst December snowstorms on record passed over Washington last weekend, Senate Democrats successfully negotiated to get the 60 votes needed to clear the first of three motions to thwart further debate on the bill and pave the way for final passage of the bill on Christmas Eve.
"It defies logic that we are now expected to vote on the overall, final package before Christmas with no opportunity to amend it, so we can adjourn for a three-week recess even as legislation will not fully go into effect until 2014," said U.S. Sen. Olympia Snow, R-ME.
How Washington Will Mess with Your Money in 2010
In this era of growing government involvement, it's no surprise that Washington is poised to be the biggest economic wild card of the new year.
Indeed, investors who are trying to estimate the impact that politics will have on their portfolios in 2010 are likely finding this attempt at analysis to be an exercise in futility.
If that's been the case, read on: Political pundits - even those who claim to be impartial - spend a lot of time trying to score points for their side. But they aren't really that interested in the economic aspects of the endless battle. I certainly don't claim to be any more unbiased than the next person. However, I thought it worth trying to take an educated guess at what will actually happen, and what it will mean for our money.
Healthcare Reform May Not Cut Spending or the Federal Deficit
Senate Democrats last week took a critical first step for U.S. President Barack Obama's sweeping healthcare overhaul when they successfully held off Republican efforts to reverse $460 billion in cuts to Medicare - money needed to expand coverage to tens of millions of uninsured Americans.
But as the political battle wears on this week, experts say the debate should turn its focus to one critical question: Will the legislation will put a damper on soaring healthcare costs or simply pile millions of people onto a system that already is threatening to drive the United States into bankruptcy?
Despite contentions by the White House that the bill is a necessary first step in efforts to reform an out-of-control medical system, most analysts are deeply divided over the long term implications of both the Senate and House bills for medical spending and federal deficits.