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Monday, September 29, 2008

Why $700 Billion?

According for Forbes.com:
In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."
Read the entire article.

Thanks to Michelle Malkin, who linked to the LA Times Blog who dug this little nugget out.

Fox News analyzes:
But why $700 billion? Why not $500 billion? Or $1 trillion? And why hasn’t anyone explained that price tag?

No one seems to know.

The number is even more confusing given that one of the reasons the U.S. financial system needs bailing out is because no one knows the value of the securities that $700 billion is earmarked for purchasing.

One thing everyone (economists and market participants) agrees on, though: $1 trillion would have been too scary, frightening taxpayers and Congressman alike with the prospect of a bailout of that size. (It turns out $700 billion was too scary, as well. Congress rejected a first draft of the proposal on Monday, sending stock markets plunging.)

And $500 billion might not have been enough purchasing power at a given moment. (The language in the bill says $700 billion "outstanding at any one time.") Congress didn’t want to have to go back to the taxpayers and ask for more if $500 billion had turned out not to be enough.

So $700 billion was just right.

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