Total Financial Bailout Money Already Exceeds $2 trillion

The numbers are staggering: government funding for bailouts of various financial entities has already exceeded $2 trillion, according to various reports, with more expected to be spent by the Obama administration.

According to Scott Sinder, a partner and chair of the government relations and public policy practice for Steptoe & Johnson, Washington, D.C., the biggest portion is in the $365 billion spent on the Troubled Asset Relief Program (TARP). However, not all of this money has been spent yet.

Beyond the funds committed to the nation’s largest financial institutions, about $125 billion has been promised to “other banks,” Sinder said. About $15 billon of that money was claimed Monday when the government released $7.58 billion to Pittsburgh-based PNC Services Financial Group, Inc., $3.41 billion to Fifth Third Bancorp and $1.3 billion to SunTrust Banks, Inc., among others.

Twenty billion dollars of the TARP money is being used as seed money for the government’s Term Asset-Backed Securities Loan Facility (TALF) program, under which the Federal Reserve will extend up to $200 billion in non-recourse loans to holders of asset-backed securities (ABS) backed by consumer and small business loans in a bid to free up the ABS market.

But before those plans were even announced, the government was already deep into the bailout process. According to CNNMoney.com, following Bear Stearns' $29 billion bailout in March, there was the $200 billion government takeover of mortgage finance giants Fannie Mae and Freddie Mac in early September, AIG for $152.5 billion (of which more than $127.5 billion has already been spent) just a couple of weeks later, and Citigroup for $325 billion.

There was another $16.7 billion spent in other FDIC takeovers of more than 20 banks, the most notable of which was Washington Mutual.

Those figures alone bring the total to nearly $1.1 trillion (only the $20 billion in seed money of the $200 billion TALF program was used in the calculation).

The dollars have been flying so fast that attempts by many news organizations to get a handle on just how the money was used once financial institutions received it have been fruitless.

Sinder said this lack of transparency has raised enough backlash that any further TARP funds won’t be released without a much more clear understanding of exactly how the money will be used.

Beyond those monies, CNNMoney.com lists commitments of $1.4 trillion in a commercial paper funding facility, $320 billion for the FHA, $659 billion in money market guarantees and $9 billion in student loan guarantees. The total is another $2.4 trillion.

The government should be able to start seeing some of the benefits of its investments in the first quarter of 2009, when the preferred stock that it received as part of many of the funding efforts.

Indeed, Bank of America said earlier this week that it is paying its first dividend of $223 million next month back into the TARP funds

“The preferred dividends are [relatively] low for the first five years, then they go much higher, so there’s incentive for the financial institutions to repurchase the preferred stock,” Snider said.