$23,000,000,000,000!?

It was widely reported this week that the recession bailout would put the US government on the hook for more than $23 trillion dollars. I smelled fertilizer when I read that figure and the wise Barry Ritholtz did too. So how inaccurate is it? Let's count the ways with Ritholtz:


• It includes estimates of the maximum cost of programs that have already been canceled or that never got under way.

• It assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless.

• It assumes that every bank in America fails, with not a single asset worth even a penny.

• And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

• It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.

• Every dollar invested by the government in banks would have to become worthless

• The banks would have to default on securities guaranteed by the F.D.I.C.

• All the collateral posted by the banks to get loans from the Fed would also have to become worthless.

Ultimately, according to Floyd Norris of the New York Times, the United States has spent something closer to $2 trillion so far. A humbling figure to be sure, but one big decimal point -- and $20 trillion -- away from the bogeyman figure flaunted in testimony.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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