The Federal Reserve is Winding Down its Bailout Support

Today, just two (2) years after a financial meltdown threatened the United States and the world, with the collapse of Bear Stearns and Lehman Bros., and Fannie Mae and Freddie Mac heading down under as well…The Federal Reserve's financial rescue programs are winding down.  The final cost to the U.S. Taxpayers: a cool estimated $300 billion to $450 billion. 

Parts of the financial rescue plans are already wrapped up or will be soon. A money market fund guarantee from the Federal Reserve disappeared months ago. Programs for purchasing commercial paper, lending to securities firms to keep them afloat, loaning dollars to foreign banks to help thaw credit and purchasing debt backed by small business, car and other loans have all served their purpose and will end shortly, with little cost to taxpayers.  Other changes will be permanent…a hike in FDIC insurance of bank deposits, for example.

And many big-bucks programs will linger. Subsidies for Fannie Mae and Freddie Mac to keep home mortgage funds flowing will continue through at least 2013, for example.  So far…about $145 billion. And the final tab could climb to as much as $400 billion by the time the quasi-governmental institutions wring out all the bad loans made.

Washington has $13 billion left to help homeowners avoid foreclosures. A total of $50 billion is dedicated to the program, which has been operating for a year.  The Federal Reserve holds a total of $2 trillion in long-term bonds…mortgage backed securities, Treasuries, Fannie Mae and Freddie Mac bonds…bought to hold down mortgage rates.