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The Graph That Will Solve the Financial Crisis
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It now sounds like Treasury Secretary Tim Geithner's big bold plan to buy toxic assets from the banks might not even get off the ground. According to the WSJ, investors are feeling too skittish to marry their money to government backing. Two months ago, this would have sent the economy into a tizzy. Today, it doesn't make the WSJ.com homepage (unlike Bing.) Ultimately, the Geithner plan was never as important to solving the financial crisis as the actions taken by the Federal Reserve. This graph explains why:
Here's a pie chart that puts into perspective the size of the Fed's involvement in the financial crisis. The entire circle represents approximately 8 trillion dollars. Yes, $8,000,000,000,000. The blue quadrant represents federal lending including expansion of swap lines to the tune of about $2 trillion. The purple quadrant comprises housing related purchases ($1.45 trillion) and buying $1.8 trillion of commercial paper. You can see a more itemized breakdown here.
Remember the debate over the stimulus package? Comparative chump change. As Ezra Klein points out, when historians looks back on the Great Recession and ask "What saved us?" the answer might not anybody in the White House or Treasury Department, but Ben Bernanke and the swift and unprecedented response of the Federal Reserve for fighting the financial fire, not with a hydrant but with an ocean.
The graph was put together by the Atlantic's Timothy Lavin and Anup Kaphle.
Update: Ezra Klein emailed to ask about where TARP fits into this graph and the answer is: It doesn't. The graph was drawn up to demonstrate the overwhelming impact of Fed rescue plans vs. Congress' stimulus package, not as a comprehensive look at the entire bailout from Congress and Treasury and the FR, which I should have made more clear. And also, since the Fed Reserve's balance sheet is terribly shape-shifty, the link is basically just a good visual guide to the Fed's overwhelming involvement rather than a real-time valuation.
Here's a pie chart that puts into perspective the size of the Fed's involvement in the financial crisis. The entire circle represents approximately 8 trillion dollars. Yes, $8,000,000,000,000. The blue quadrant represents federal lending including expansion of swap lines to the tune of about $2 trillion. The purple quadrant comprises housing related purchases ($1.45 trillion) and buying $1.8 trillion of commercial paper. You can see a more itemized breakdown here.
Remember the debate over the stimulus package? Comparative chump change. As Ezra Klein points out, when historians looks back on the Great Recession and ask "What saved us?" the answer might not anybody in the White House or Treasury Department, but Ben Bernanke and the swift and unprecedented response of the Federal Reserve for fighting the financial fire, not with a hydrant but with an ocean.
The graph was put together by the Atlantic's Timothy Lavin and Anup Kaphle.
Update: Ezra Klein emailed to ask about where TARP fits into this graph and the answer is: It doesn't. The graph was drawn up to demonstrate the overwhelming impact of Fed rescue plans vs. Congress' stimulus package, not as a comprehensive look at the entire bailout from Congress and Treasury and the FR, which I should have made more clear. And also, since the Fed Reserve's balance sheet is terribly shape-shifty, the link is basically just a good visual guide to the Fed's overwhelming involvement rather than a real-time valuation.
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