THE STASH FEBRUARY 26, 2009
Readers of this blog may have been a little confused this morning. On the one hand, I've reported that Congress isn't likely to give the administration another cent for the banks, at least not any time soon. On the other hand, the reports on Obama's budget suggest he's asking for another $250 billion in bank bailout money (and that's a net cost; the gross number is $750 billion). As the Times reported this morning:
The deficit, which at 12.3 percent of gross domestic product is expected to touch its highest level since 1945, could grow this year if the economy worsens significantly and a new infusion of capital into distressed banks is ordered; the administration has estimated that this might call for adding $250 billion to the cost of the bailout already approved by Congress.
So what's going on? Is Obama suicidal?
Unlikely. As the budget document itself points out:
Additional action is likely to be necessary to stabilize the financial system and thereby facilitate economic growth. Although the Administration is not requesting additional funds from the Congress at this point and although it is not yet possible to provide a precise estimate of how much additional Federal action may be involved should the Administration need to request such funds, the President’s Budget nonetheless includes a $250 billion contingent reserve for further efforts to stabilize the financial system. The approach for this financial stabilization reserve is similar in spirit to the one adopted with regard to future war costs [emphasis added]...
Then, just in case there was still some ambiguity:
The existence of this reserve in the Budget does not represent a specific request. Rather as events warrant, the Administration will work with the Congress to determine the appropriate size and shape of such efforts.
So, just to reiterate: No request for more money...