OK, take a deep breath. Bloomberg is reporting that the government is planning to lend $7.4 trillion of taxpayer funds to help ease the credit crisis and financial meltdown. $2.8 trillion has already been handed out. To put that number in perspective, “the money that’s been pledged is equivalent to $24,000 for every man, woman and child in the country. It’s nine times what the U.S. has spent so far on wars in Iraq and Afghanistan, according to Congressional Budget Office figures. It could pay off more than half the country’s mortgages.” It is also “half the value of everything produced in the nation last year.”

Yikes. The scariest part of all this is the lack of oversight. The Fed has quietly lent $893 billion with no oversight, because it isn’t under the Treasury’s Emergency Economic Stabilization Act passed by Congress. (Remember that it only authorized $700 billion in bailout money). Here’s why the Fed hasn’t disclosed where the money is going. From the Washington Post article:

Following a long-standing practice designed to protect investor and depositor confidence in the institutions it deals with, the Fed refuses to name the banks and other companies accessing the cash. It has also declined to specify which assets institutions have pledged as collateral in exchange for loans…Fed officials argue that any disclosure along those lines would create a stigma for banks and others that need to borrow from the Fed, making the programs less effective at jump-starting lending.

So our government is nationalizing huge sectors of the financial industry and we can’t know about it.

All that said, serious economists are saying that the enormous spending is needed to keep our economy afloat. Nouriel Roubini, current economic guru and NYU Stern Professor, wrote on his blog Friday:

It will not be easy to prevent this toxic vicious circle unless the process of recapitalizing financial institutions via temporary partial nationalization of them is accelerated and performed in a consistent and credible way; unless such actions are combined with massive fiscal stimulus to prop up aggregate demand while private demand is in free fall; unless the debt burden of insolvent households is sharply reduced via outright large debt reduction (not cosmetic and ineffective “loan modifications”); and unless even more unorthodox and radical monetary policy actions are undertaken to prevent pervasive deflation from setting in.

And Nobel-prize winner Paul Krugman wrote in a recent New York Times column:

To pull us out of this downward spiral, the federal government will have to provide economic stimulus in the form of higher spending and greater aid to those in distress…In normal times modesty and prudence in policy goals are good things. Under current conditions, however, it’s much better to err on the side of doing too much than on the side of doing too little…If the stimulus plan is too small there’s nothing the Fed can do to make up for the shortfall. So when depression economics prevails, prudence is folly.

Let’s hope they’re right; I don’t want my $24,000 going to waste.

Photo courtesy of lolfed.com.