Bailout funds to fix the economy come at a higher cost to U.S. taxpayers.

Originally, the Congressional Budget Office had projected that last year’s $700 billion Troubled Asset Relief Program (TARP) would cost taxpayers $189 billion. With the new budget thrown in for 2009 and 2010, this figure has risen to $356 billion. (Reuters)

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Despite public outrage over AIG bonuses, Obama had a good week. He traveled across America expressing his own outrage over the bonuses. He was warmly greeted in Orange County, California—once a bastion of conservative Republicanism. Republican Governor Swarzenegger warmly embraced him and assured him that California supported the stimulus plan. Obama appeared on the Tonight Show displaying his quick wit with the show’s host Jay Leno.

Leno raised the issue of congress threatening to tax the bonuses at 90%. “As a American,” he said that he was distressed that Congress could use the tax laws to punish a particular group. Obama responded that he understood the anger. Significantly, he did not endorse Congress’s response.

Nor did Obama mention that Congress voted for these bonuses when it passed the bailout or whether he or congress was aware of this clause in the Bill. Senator Cris Dodd (D-Conn) had appeared outraged at the bonus and told CNN that he was unaware of such an amendment. Later he told CNN that he didn’t write the clause, and later he admitted adding the clause at the insistance of Treasury Secretary Geithner.

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The banks have been paid after all as have massive bonuses for the very AIG employees that dragged the company down. All this with bailout money!

After all of the hullabaloo, AIG  paid $93 billion, more than half of what it has received in bailout cash, to Goldman Sachs Group Inc and a host of European banks. The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions. This is in addition to its plan to pay $165 million in employees bonuses funded by bailout dollars.

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The bailout plan is not working. This morning’s New York Times has reported that the U.S. government is facing mounting pressure to add to the bailout kitty.

• AIG, the nations’ biggest insurance group is now negotiating for more money following the $150 billion it has already received. It suffered a $60 billion loss in the 4th quarter of last year, the biggest in corporate history.
• Citibank is negotiating an injection of funds (over and above the $45 billion it has already received) that is likely to raise the U.S. government’s stake to about 40%.
• General Motors and Chrysler, two of Detroit’s biggest automakers, are seeking $22 billion on top of the $17 billion already granted to them. Steven Rattner, co-founder of a private equity firm, the Quadrangle Group, has been appointed an adviser to the Treasury on the auto industry.

Yet, according to Reuters, most Americans approve of President Obama’s economic plans.

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After Obama announced plans for an aggressive, two-year economic stimulus package, President-elect Barack Obama has selected the A Class Economic team that will help him to “do what’s necessary” to fix the economy.

“Vice President-elect Biden and I have assembled an economic team with the vision and expertise to stabilize our economy, create jobs, and get America back on track. Even as we face great economic challenges, we know that great opportunity is at hand — if we act swiftly and boldly. That’s the mission our economic team will take on,” said President-elect Obama.

The economic team members announced today are listed below:

Timothy F. Geithner, Secretary of the Treasury

Obama has chosen New York Federal Reserve Bank President Timothy Geithner — who rose to prominence earlier this year as a key official in shaping the US government’s financial rescue measures — to be Secretary of the Treasury.

Geithner played a pivotal role in the intense negotiations which took place before Lehman Brothers went bankrupt, and also helped forge the deals involving AIG and JP Morgan. He regularly speaks about the need for major reforms in the financial system in order to avoid further turbulence. Before joining the Federal Reserve of New York, he worked for the International Monetary Fund. He was also the Treasury’s under-secretary for international affairs, from 1999 to 2001.

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Many have questioned U.S. Treasury Secretary Hank Paulson’s decision to let Lehman Brothers fail. Christine Lagarde, French finance minister, claimed that the decision was “horrendous.” This has been echoed by many other European policy makers and investors who blame the decision on ideology, claiming that Paulson refused to offer aid to avoid accusations of moral hazard.

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Thank you getthebigpicture.net. Video source: MBelinkie on YouTube

The government’s latest bailout news involves a plan to make the biggest intervention in the financial markets since the 1930s. Central to this plan would be a mechanism to bad assets off the balance sheets of financial companies or instead perhaps to create a federal insurance for investors in the money market funds. Additionally, the Securities and Exchange Commission is getting ready to propose a temporary ban on short selling financial stocks.

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So far, $200bn has been spent saving Fannie Mae and Freddie Mac with another $300bn to prop up the Federal Housing Administration.

On top of that, there’s with an additional $69bn to buy up the companies’ discount notes, $29bn to keep Bear Sterns alive and $85bn to keep AIG going. That’s another $183bn, taking the running total to $683bn.

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