Thomas Friedman exaggerates bailout cost

Matthew Yglesias rightly objected to the people who rounded up the $700 billion tab for the financial bailout to "nearly $1 trillion" -- a description that is technically true but glosses over a difference of $300 billion.

He didn't follow up, but it's worth noting that Thomas Friedman (in one of his trademark fake letters from one foreign leader to another) actually called it "a $1 trillion bailout for our troubled banking system." No!

Comments

[Jinchi]

I think you're guilty of attributing too much credence to the $700 billion figure. According to Forbes:

"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."

Pretending that $700 billion is a hard number is a mistake which also ignores the fact that we've already extended government money to prop up AIG ($85 billion) and Fannie and Freddie Mac (up to $200 billion). My guess is that this $85 + $200+ $700 billion is where Friedman's trillion dollar figure came from.

Paulson has also repeatedly stated that the government might need to put up more or less than the amount he requested.

[Jinchi]

You're also ignoring the fact that since the bailout uses borrowed money, the real cost could easily be double over the lifetime of the loans.

[Msjpacke]

Also, many are assuming the cost of the other bailouts at roughly $300 billion, so the cost of $1 trillion is the extra assumed debt via the Treasury Dept.