Looks like the U.S. government just did the same thing.  The problem is, it's our money. And, it now looks more than likely that Bernanke and Paulson will be hitting us up for at least another couple of trillion dollars...maybe even before Obama takes office on January 20th.

First, they lie to us about the cost of this...

Today's Awful Headline On The Economy #1:"Fed May See Lending to Companies, States as Next Crisis Fronts."

Oct. 6 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may find the next fronts of the financial crisis to be just as chilling as last month's downfall of Wall Street titans: its spread to corporate America and state and local governments.

Companies from Goodyear Tire & Rubber Co. and Duke Energy Corp. to Gannett Co. and Caterpillar Inc. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Governor Arnold Schwarzenegger says his and other states may need emergency federal loans as funding dries up.

A cash crunch on Main Street would endanger companies' basic functions -- paying suppliers, making payrolls and rolling over debt. The widening of the crisis suggests that Bernanke and Treasury Secretary Henry Paulson may have further fires to put out even as the Treasury sets up the $700 billion financial- industry rescue plan approved last week.

"The rest of the economy is clearly being affected right now by the tightness of credit,'' said Kurt Karl, chief U.S. economist at Swiss Reinsurance Co. in New York. ``It's just gathering momentum in the wrong direction.''

(Bold type is diarist's emphasis.)

But, on Saturday, September 27th, I observed that this was already happening in this diary: "Bailout myths: What we all need to know."

Second, they gradually let us know this is all going to cost us a hell of a lot more than just a 'mere' trillion bucks...

Today's Awful Headline On The Economy #2:"Bank Writeoffs May Triple, Bond Spreads Fall on TARP (Update1)"

Oct. 6 (Bloomberg) -- While the plan will let financial companies sell toxic securities to the Treasury, banks may have to recognize bigger losses than the $586 billion recorded since the start of 2007 because the assets haven't been written down enough, according to JP Morgan Securities Inc. Losses may reach $1.7 trillion, Christopher Flanagan, a New York-based analyst at the firm, estimated in an Oct. 3 report to clients.

--SNIP--

Mounting losses and doubts that Congress would give U.S. Treasury Secretary Henry Paulson power to purchase mortgage- backed securities and other troubled assets with taxpayer money caused global credit markets to lose 5.16 percent of their value in September on average, Jack Malvey, a strategist at Barclays Capital in New York, said in a report to clients dated Oct. 6. Last month's losses were worse than in any single year, he said.

The seizure that began in August 2007 deepened as the London interbank offered rate, or Libor, that banks charge each other for three-month loans in euros increased to a record 5.33 percent last week, according to the British Bankers' Association. The corresponding rate for dollars climbed to 4.33 percent, the highest since January.

(Bold type is diarist's emphasis.)

But, I went over all of this with you this past Thursday, October 2nd, right here: "What part of 'this bailout won't work' don't you get?"

What's truly at the core of the world's financial services crisis--certainly in this particular instance--is the reality that lenders lose trust in other lenders. If a bank really doesn't know how worthless (how much of a markdown they're going to end up eating) their own portfolios are--i.e. mortgages, consumer loans, etc.--they sure as hell aren't going to trust what they see and hear about their competitors' portfolios. So, doubt and uncertainty rule the day, including today; and, credit dries up between banks: "Libor Soars, Commercial Paper Slumps as Credit Freeze Deepens."

What part of the reality that banks don't even trust other banks right now--so they're sure as hell not going to trust [businesses or] consumers--don't our elected representatives and their constituents understand? This is self-evident in the record levels being set with LIBOR right now (today)? ("LIBOR" is the London Interbank Offered Rate, which is the interest rate at which banks loan other banks money.) Today, LIBOR is at its highest rate...EVER. (See link from today's news in previous paragraph.) It is the most basic indicator of the level at which one bank trusts another bank's ability to repay a loan. It's, perhaps, the single-most important indicator of how insiders view the state of the financial services sector, themselves.

If banks don't trust other banks, they aren't going to trust corporations or individual consumers, for that matter. So, why should WE, the taxpayers, trust them?

There's a very basic concept at play here--one which just about anybody can understand--which undermines the entire concept of the supposed intent behind a "bailout." That concept is this: If you give a bank money, do you really think they're going to give it back to you--at anything other than the most exorbitant of rates--rather than hold onto it to either cover other losses, or just (conservatively) otherwise (mis)use it to ride out the worst financial crisis in generations?

So, what's happening is we're sliding into global deflation. People have less and less disposable income. Lenders are less likely to lend money. Consumer demand drops dramatically. People stop buying "stuff." Less stuff is made. Unemployment rises because people lose their jobs when there's less demand for goods and services. Growth is strangled. Prices drop in the hope that people will start buying stuff again. In three words: Everything goes downhill. It feeds upon itself, spiralling downward. And, that's the Cliff Notes version of "deflation."

Third, they start using a word that begins with "D," or "DEFLATION," which is really just code for that other "D-word"...

Today's Awful Headline On The Economy #3:"Deflation May Be Next Threat as Commodities, Asset Markets Sink."

Oct. 6 (Bloomberg) -- As Federal Reserve Chairman Ben S. Bernanke and his global colleagues fight the worst financial crisis since the 1930s, one danger is looming larger by the day: deflation.

With asset markets tumbling, commodity prices plunging the most in 50 years and banks keeping a tighter grip on credit, the ingredients for a sustained period of falling prices are coalescing. While inflation is still a concern for many policy makers only months after oil and food prices peaked, the risk is their patchwork of rescue and stimulus packages will fail, and prices will start to fall throughout the broader economy.

"The ghost of deflation could be dragged out of the closet again in coming months,'' says Joerg Kraemer, chief economist at Commerzbank AG in London.

--SNIP--

The deflation scenario might go like this: Banks worldwide, stung by $588 billion in writedowns related to toxic assets -- especially mortgage-related securities -- will further reduce the flow of credit, strangling growth. That will push house prices lower, forcing additional losses and making banks even more reluctant to lend. As the credit crisis worsens, businesses will find it almost impossible to raise prices.

--SNIP--

"A vicious deflationary cycle'' could then ensue, says Tony Tan, deputy chairman of Government of Singapore Investment Corp., a sovereign-wealth fund that oversees more than $100 billion.

Prices are already falling in parts of the world economy. Home values dropped more than 10 percent in the U.K. and in the U.S. in the past year. Oil, copper and corn drove commodities toward their biggest weekly decline since at least 1956 on Oct. 3, with the Reuters/Jefferies CRB Index of 19 raw materials tumbling 10.4 percent. The Baltic Dry Index, a measure of commodity shipping costs, has dropped 75 percent since May.

"We are certainly more worried about deflation than inflation,'' says David Owen, chief European economist at Dresdner Kleinwort Group Ltd. in London. "

But, I also covered this with you this past Thursday, October 2nd in the same story I linked to, above: "What part of 'this bailout won't work' don't you get?"

Fourth and finally, the media--and Bernanke and Paulson tacitly--let us know the next business day after they received the first trillion bucks, that 'it's getting much, much worse'...

So, summing it all up,  here's yet another nightmare story, also from this morning's headlines:

Today's Awful Headline On The Economy #4:"Global Stocks, U.S. Index Futures Fall as Credit Crisis Widens."

Oct. 6 (Bloomberg) -- Stocks tumbled around the world, the euro fell to a 13-month low against the dollar and oil dropped below $90 a barrel as the year-long credit market seizure caused bank bailouts to spread through Europe. Government bonds rallied.

--SNIP--

"It's like a fire,'' said Emmanuel Soupre, a fund manager at Neuflize OBC Asset Management in Paris, which oversees the equivalent of $33 billion. "It's easier to extinguish five minutes after the start. Now we're about an hour into it. We have to act quickly to assure the continuity of the financial system to avoid an irreversible contamination of the entire economy.''

Yes, concurring with prescient economist Nouriel Roubini's own words in my diary from last Tuesday, September 30th: "The Bailout is a Disgrace and a Rip-off!"

So, maybe Paulson and Bernanke will start addressing our problems with municipal, county and state budgets now. And, maybe they'll even start supporting  the corporate sector, so we can stop the bleeding as far as unemployment's concerned. That should only cost us taxpayers another trillion or two, right? I wonder if they'll even frame it as being the "emergency" it was last week, when us taxpayers 'absolutely, positively, overnight' had to wire $700 billion to Paulson's old employer of 32 years, Goldman Sachs as well as a few other of his former friends/colleagues!

Who knows? By Christmas, us taxpayers (if we're on good behavior until then) might even get another check for $600!  Gosh! I could buy some food; maybe pay for the heating bill for a couple of weeks; maybe even splurge and keep the lights on so I won't have trouble reading the foreclosure notice from my mortgage company when it comes in the mail around New Year's Day!

Happy Holidays? I don't think so...maybe around Christmas 2011 or 2012, perhaps.