My Opinion of the Bailout

Many of you have asked me what I think of the massive financial bailout package that was just passed by Congress. Basically, I think the package is merely a small Band-Aid on a very large problem. In fact, the bailout package won't begin to absorb the costs of the credit crisis which have now reached $1.8 trillion.

I should add that that the $1.8 trillion figure doesn't even include the money that Treasury may have to loan the FDIC after its insurance reserves are depleted. The FDIC dodged a bullet Friday when Wells Fargo (WFC) submitted a superior ($15.4 billion) offer to absorb Wachovia (WB). Most important, this offer wouldn't cost the FDIC any money, while the previous offer from Citigroup (C) could have cost the FDIC hundreds of billions of dollars. (We can also thank Warren Buffett, who is Wells Fargo's biggest shareholder, for the superior Wachovia offer. Buffett has also signed lucrative multi-billion-dollar preferred deals with GE and Goldman Sachs (GS) to inject capital in these struggling institutions.)

Unfortunately, I suspect that the $700 billion bailout package may be just the tip of the iceberg.

by Louis Navellier |  10/06/08  |  Stocks: GE, WB, WFC,