Banks Get $200 Billion...Tell Me That Isn't A Buyout!

Yesterday, the feds in their infinite wisdom decided to pump an additional $200 Billion into the financial markets to help ease the credit and mortgage crisis even further. As soon as the news hit the markets, the Dow Jones Industrial started to climb and climb, eventually gaining over 400 points, the biggest one-day jump since 2002. Also shares of both JP Morgan Chase and Citigroup (Chase Manhattan & Citibank) were up over 6% and 9% respectively. American homebuilder Centex was also up 11.5%.

Now, while I applaud the feds desire to increase the funds available to the banks to ease this credit crunch, it also sounds like the feds are going to be bailing out the big banks. They are not only pumping the money in, they are also considering purchasing some mortgage backed securities from Fannie Mae and Freddie Mac, as well as looking into purchasing them from investment companies such as Morgan Stanley, Merrill Lynch and others as well.

There has been a lot of speculation on Wall Street as to how much capital is needed to keep the credit markets flowing with the mortgage crisis still in existence. Most experts agree that the amount needed is between $250 Billion to $500 Billion. My personal belief is somewhere between $350 and $400 Billion.

Think about that for a minute. $500 Billion. That is the net worth equivalent of 9 Warren Buffett's or 12 Bill Gates', just to ease and possibly eliminate the mortgage credit crisis. It is also higher than some third world country's Gross Domestic Output in a year. It is also the rough equivalent of 1/8^th of the United States budget for this year. It is also about the amount of money we have spent on the Iraq war so far.

So with the feds now putting another $200 Billion into the pot and considering purchasing these securities, please tell me how we aren't bailing out the banks when it looks like we are doing just that. It sounds like no matter what we are going to just print out enough money to make sure the credit crisis just goes away and to hell with the value of the dollar.

Am I wrong? Are we not bailing out the banks? Are we not printing money to bail everyone out, including ourselves?