What has the bailout done so far?
Billions have been spent on the bailout already, and we've been keeping track. Steve Henn reports where the money went for our series "Tracking the Bailout."
The Federal Reserve Bank (www.federal-reserve.org/)
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TEXT OF STORY
Kai Ryssdal: Tim Geithner's been in the thick of the bailout negotiations, right there alongside Henry Paulson and Ben Bernanke. And that makes this an excellent day to explore how things are going, because all of the sudden this week, it started not looking so good. Marketplace's Steve Henn is on the bailout beat.
Steven Henn: The U.S. Treasury is injecting $290 billion into banks and insurance companies. The idea was this would get lending moving again. And it seemed to be working, then this week something changed. Charles Gabriel at Alpha Partners, he tracks political risk for investors. He says Secretary Paulson's recent announcement that he's not going to buy toxic mortgage assets stunned Wall Street.
Charles Gabriel: You have a Treasury Secretary that seems to have left the field before the end of the third quarter.
Earlier this week, Paulson told Congress that he would not seek authorization to spend the remaining $350 billion in the bailout. Interest rates banks charge each other for loans spiked. And the yield on one-month treasury bills neared zero. That means people are so desperate for a safe place to put their money, they're willing to lend it to the Feds for free. Speaking around noon today, Gabriel was almost despondent.
Gabriel: I'm just in a state of shock.
He said the markets were horrified at the leadership vacuum in Washington.
Gabriel: If all that the Fed and treasury have done has failed to re-establish confidence, then you really have to worry about a total meltdown.
But Ted Truman, a former Fed economist who's now at the Peterson Institute, says there's still a lot the Fed can and should do.
Ted Truman: Especially in this environment.
Truman says the Fed should slash interest rates to zero and pump money directly into the housing market. And there's no need to wait until Obama and his new Treasury Secretary Tim Geithner take over.
In Washington, I'm Steven Henn for Marketplace.
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