The Cost of Government Financial Interventions, Past and Present
"In response to ongoing financial turmoil that began in the subprime
mortgagebacked securities market, the federal government has intervened with
private corporations on a large scale and in an ad hoc manner three times from the beginning of 2008 through September 19, 2008. The firms affected were Bear Stearns, Fannie Mae and Freddie Mac, and AIG. Another large investment bank, Lehman Brothers, sought government intervention, but none was forthcoming; subsequently, the firm sought bankruptcy protection.

These interventions have prompted questions regarding the taxpayer costs and
the sources of funding. The sources of funding are relatively straightforward,
the Federal Reserve (Fed) and the U.S. Treasury. The costs, however, are difficult to quantify at this stage. In the most recent interventions (Fannie Mae and Freddie Mac, and AIG), all the lending that is possible under the interventions has yet
to occur. Also, in all the current cases, the government has received significant debt and equity considerations from the private firms. At this point, Fannie Mae, Freddie Mac, and AIG are essentially owned by the federal government. Depending
on the proceeds from the debt and equity considerations, the federal government
may very well end up seeing a positive fiscal contribution from the recent interventions, as was the case in some of the past interventions summarized in the tables at the end of this report."