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$750 More for Banks in Obama's Proposed Budget

By Anonymous

So reports Bloomberg:

President Barack Obama?s first budget request would provide as much as $750 billion in new aid to the financial industry, as well as overhaul the U.S. health-care system and launch a program to cut carbon-dioxide emissions.
...
The official, speaking on condition of anonymity, said the White House hasn?t decided whether the $750 billion in additional aid to the financial industry will be needed. He said it will be put in the budget as ?placeholder.?

The official said the aid would appear in the budget as about $250 billion because the rules require policymakers to record the plan?s net cost to taxpayers. The government anticipates it would eventually recoup some, though not all, of the money expended to help financial companies.

The idea that the extra $750 billion is just a "placeholder" is eerily reminiscent of Hank Paulson's infamous "bazooka" strategy:

The Treasury Department has asked Congress to approve an unlimited, temporary line of credit to Fannie and Freddie. Paulson said he was seeking an open-ended amount in the hope that the credit lines would never need to be tapped.

"If you've got a squirt gun in your pocket, you may have to take it out. If you've got a bazooka and people know you've got it ... you're not likely to take it out," Paulson said. "By having something that's unspecified, it will increase confidence and by increasing confidence it will greatly reduce the likelihood it will ever be used."

How'd that work out?

Full post as published by Economics of Contempt on February 26, 2009 (boomark / email).