Earlier I objected to Lowry's claims that without the bailout we would have a collapse of the financial markets, or as he put it "capitalism without capital."

Now, let us look at that claim.

First, as I said, the $700,000,000,000 is the total of the bill, not the actual total of the amount of assets we would lose. To start, we need to reduce that by the amount of pork added in. That probably brings us down to around $600,000,000,000, maybe less. We also have to allow for administrative overhead and the money allocated for bureaucracy and other overhead. We can safely say we are likely at $500,000,000,000. That is probably the amount the banks estimated for losses. But, as we all know, when you are making a claim, you always inflate the amount. So, in all likelihood, some of those $500,000,000,000 in "worthless" claims could probably be made to perform if the lender were on the hook for the loss, rather than the feds. And that doesn't even take into account the possible reclaimed value through the seizure and sale of the assets backing those loans, that is the housing. In all likelihood,t he total loss will be more in the area of $250,000,000,000.

Now, that sounds like a lot, until you think about how big the whole banking system is. Even limiting ourselves to the US banking system, not the world banking system, the numbers are just huge. According to the Federal Reserve, in March 2008, the banks making up the Fed held assets totaling $14,200,000,000,000. That excludes other sources of private capital, such as offshore accounts, privately held capital, and many other alternate, non-bank sources.

However, let us look at the worst case. Using the $700,000,000,000 worst case figure, that is still less than 5% of the total holdings of the Federal Reserve system. That is a blow, yes, but hardly crippling, and certainly not the end of capitalism or even of the capital markets.

Using more reasonable numbers, the total available capital, including possible offshore investment, foreign banks, private holdings, investment banks not in the Fed, and Federal Reserve banks, we probably have $18,000,000,000,000 to $20,000,000,000,000 of potential capital, while the losses will, once they are offset by sales, by more aggressive collections, and so on, a total of about $250,000,000,000 in losses. Which gives us a drop of about 1.25% in the total capital market. Or 1.76% if we use just the federal reserve banks. That is even farther from the end of capital.

In fact, given the economic growth figures, even assuming a sluggish 1% growth during the recovery, within two years we would have recovered and more, provided the government can keep out of the market and resist calls to interfere.

Actually, a better analogy may be to compare this loss to other recent losses.

Katrina is estimated to have caused $80,000,000,000 in damages. So, using my estimates of about $250,000,000,000 once all recovery efforts are exhausted, it will be the equivalent of about 4 Katrinas. Considering that, while horrible, Katrina had negligible impact outside of the refineries which were closed, that is hardly a terrifying thought.

Or to take another number, California lost about $9,000,000,000 in restaurant revenues due to smoking bans.If the entire nation were to ban smoking in restaurants, it would likely bring about losses equivalent to my $250,000,000,000 in losses. Since there are groups advocating for just that, obviously they cannot think such losses would destroy the economy.

Or, for a final comparison, let us look at 9/11. While an incomparable human tragedy, the damage tot he economy was not catastrophic. However, the number suggest that the economic harm form 9/11, in losses to NYC, losses form the collapse of tourism, and the increased security costs, exceed by a wide margin the $250,000,000,000 I anticipate. Business losses alone in NYC were $50,000,000,000, not counting the increased security costs, or rebuilding. My point being, while  the subsequent economic slump was uncomfortable, it was hardly a new great depression or the end of capitalism.

So, my thought is this. We will have to pay off these losses eventually. No plan suggests cutting spending or raising taxes, so any bailout will simply involve deferring payment by taking loans or printing money. Since that means we will just postpone facing the music rather than paying it off, why not just face it now? We have survived as bad or worse, and it did not bring about a great depression.

If only the press would stop trying to panic the public, and Republicans would unite in opposing any bailout, AND EXPLAIN WHY, we could easily weather this storm and return to an economy stronger for having removed some of the dead weight.

POSTSCRIPT

By the way, why do none of the suggested bailouts include the end of Freddie Mac and Fannie Mae? Have we not come to the conclusion yet that these are dreadfully bad ideas, and such government-private "partnerships" need to be eliminated?