Marc Faber Says $5 Trillion Needed for U.S. Financial Bailout

[Not the Only One]

Sept. 26 (Bloomberg) -- Marc Faber, managing director of Marc Faber Ltd. in Hong Kong, said the U.S. government's rescue package for the financial system may require as much as $5 trillion, seven times the amount Treasury Secretary Henry Paulson has requested.

U.S. lawmakers will meet again today in a bid to reach agreement on Paulson's $700 billion rescue. Republicans are resisting the plan to buy troubled assets because they say it would force taxpayers to bail out financiers.

``The $700 billion is really nothing,'' Faber said in a television interview. ``The treasury is just giving out this figure when the end figure may be $5 trillion.''

...

``The decline in home prices of 20 percent is a relatively minor decline so far and it has created so many problems,'' Faber added. ``The US is in much worse shape'' than Japan was when its stock market crash ushered in a decade-long slump in 1990.

To contact the reporter on this story: Ben Sills in Madrid at [e-mail]

Last Updated: September 26, 2008 07:33 EDT

http://www.bloomberg.com/apps/news?pid=20601103&sid=a9woTYK2OKWI&refer=us">link...

[TheDonkey]

1. We've gone way past "Dr. Evil" territory

$100 Trillion dollars!

[LiberadorHugo]

3. $100 Billion dollars!

Even in 1997, that was a pretty pitiful ransom amount for the destruction of Earth. 1/6 of Canada's debt (at the time...It's now about 1/4 of that.) for the salvation of the Earth and of the human race is a fair trade.

[jakem]

2. Ill take mine in $20 and $50s please...

[Blackhatjack]

4. I think Faber is right and will be condemned for speaking the truth...

This is a much bigger problem than we have been told.

It will be a long time before any kind of 'normalcy' returns to our financial system.

[lapfog_1]

5. I'd sure like to know how they come up with these numbers.

They just aren't plausible.

Let's say that there are 5 million mortgages in trouble. And while some of them are jumbos ($500K and up) in California or a few other markets, I would guess the vast majority are in the $250K range or lower.

5 x 250 = 1250 K X million is billion.

So IF the value of these mortgages dropped to zero, $1.25 T, but they didn't drop to zero, only by 30 to 40 percent so far (and presuming that a bail out fixes things, no further). So now you are talking about $500 B loss.

And no one is saying that the entire loss of the investor will be covered by the bail out, probably there will be some pain shared and the loss will only be covered to, say, 60 to 80 percent. That means that a bailout of 5 million mortgages would only cost $300 B to $400 B.

Fix the mortgage / housing mess and the rest of the debt markets take care of themselves.

The folks that came up with the $700 B probably did this quick math and then doubled it for "good measure".

currently, there are only 2.5 million homes either in foreclosure or in trouble. there are possibly another 2.5 million which COULD be in trouble if ARMs are reset and/or there is a severe economic downturn. However, it's entirely possible to convert these remaining ARMs to fixed rate and extend the terms of the mortgage to drop the payment to what the homeowner is covering right now.

[beyurslf]

6. Ok. We don't have 5 Trillion dollars to spend. Someone needs to let Washington know that they cannot

just spend and spend and spend. Eventually, we have to pay. And, we don't have $5 Trillion. We don't have $1 Trillion, really. When will fiscal sanity return. Please?

[David__77]

7. A million gazillion!

The numbers game is so irrelevant from a public policy perspective at this point. Anything is too much if given away.