Financial Bailout Balloons to the Trillions

By RUSSELL GOLDMAN

The government's financial bailout will be the most expensive single expenditure in American history, potentially costing around $7.5 trillion -- or half the value of all the goods and services produced in the United States last year.

(ABC News Photo Illustration)

In comparison, the total U.S. cost of World War II adjusted for inflation was $3.6 trillion. The bailout will cost more than the total combined costs in today's dollars of the Marshall Plan, the Louisiana Purchase, the Korean War, the Vietnam War and the entire historical budget of NASA, including the moon landing, according to data compiled by Bianco Research.

It remains to be seen whether the government's multipronged approach to bail out banks, stimulate spending and buy up mortgages will revive the economy, but as the tab continues to grow so does concern over where the government will find the money.

Monday the government guaranteed an additional $306 billion to bail out Citigroup, and today Treasury Secretary Henry Paulson pledged $800 billion to make credit more available to consumers and small businesses, and to buy up mortgages from Fannie Mae and Freddie Mac.

Congress last month allocated $700 billion for an emergency bailout of some of Wall Street's most storied firms by purchasing their troubled assets. The funds allocated through the Troubled Assets Relief Program are but a small part of the government's overall bailout spending.

Bailout programs also include a Federal Reserve plan to buy as much as $2.4 trillion in short-term notes called commercial paper that began Oct. 27, and an FDIC plan to spend $1.4 trillion to guarantee bank-to-bank loans that commenced Oct. 14, according to Bloomberg News, which first compiled the total cost of the bailout.

In March, the government spent $29 billion to help JPMorgan Chase take over Bear Stearns and allocated $122.8 billion in addition to TARP to bail out AIG, once the world's largest insurance company.

"No one really knows if any of this is going to work," said Barry Rithotlz, CEO of Fusion IQ, an online quantitative research firm and author of "Bailout Nation."

"All of these different things are going to have a limited impact, and it remains to be seen which if any of them will resolve anything. Paulson today pledged $600 billion to buy debt backed by government chartered Freddie Mac and Fannie Mae. That will put more money into the system, but so far we haven't see a tremendous response to mortgage rates."

Treasury Secretary Henry Paulson speaks during a briefing at the Treasury Department Nov. 25, 2008, in Washington. Paulson briefed reporters on the implementation of the Emergency Economic Stabilization Act.

(Mark Wilson/Getty Images)

The federal government today announced two new plans, allocating a combined total of $800 billion to help stimulate the economy by making credit more easily available to consumers, a move Paulson called vital to strengthening the economy.

"Millions of Americans cannot find affordable financing for their basic credit needs. And credit card rates are climbing, making it more expensive for families to finance everyday purchases," Paulson said. "This lack of affordable consumer credit undermines consumer spending; as a result, it weakens our economy."

Paulson said $200 billion would be allocated from the remaining $350 billion in TARP to banks to back things like student loans, auto loans and credit cards in the hopes that small business and consumers, who were virtually frozen out of the credit market last month, can recommence spending.

An additional $600 billion, not included in the original TARP bailout, would be used to buy mortgages -- $100 billion purchased directly form Fannie Mae and Freddie Mac, and $500 billion spent on mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.

Paulson said today's newest initiatives were small pieces of an historic program, and that there was no one solution the government could implement to rescue the economy.

"It is naive for any of us to think that when you are dealing with a situation of this magnitude that a bill could be passed or a single action taken to make all the issues go away," he said. Paulson didn't specifically say where the government would get the money from, but it would likely print more dollars and borrow in the Treasury markets.

"It's a combination of things," said Ritholtz. "They'll print money and inflate our way out of the current situation -- essentially devalue the dollar, print more dollar bills and print more notes."

Economist Joel Narroff said the government would likely borrow the money.

"The government will borrow, essentially run up the debt. We're looking at a deficit in the trillions of dollars. We'll worry about the deficit later. At this point, Paulson is saying, 'Where are the fires, and trying to pour water on them as much as possible,'" he said.

Paulson must go to Congress to get the second $350 billion remaining in TARP, $200 billion of which was pledged to asset-backed securities such as student and car loans.

Paulson said there was no timeline for going back to Congress, but that the $200 billion was "a starting point."

Under TARP, the secretary is required to return to Congress to receive the second half of the program's total allotment of $700 billion.

Of the first half, some $290 billion had already been allocated. The first TARP tranche of $158 billion was dispersed on Oct. 28 to nine banks: Bank of America, Bank of New York Mellon Corp., Citigroup (thought it later received more money), Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street Corp., Wells Fargo and Merrill Lynch.

An additional $91 billion was allocated Nov. 14, leaving some $60 billion unallocated.

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Bayer to pay $97.5M to settle kickback probe

MATTHEW PERRONE

WASHINGTON — German medical conglomerate Bayer will pay $97.5 million to settle U.S. government allegations that it paid kickbacks to medical suppliers to boost sales of its diabetes products.

The Justice Department said Tuesday that the settlement resolves an investigation into whether Bayer bribed 11 diabetic suppliers into switching patients to its products from competitors' offerings.

Tarrytown, N.Y.-based Bayer Healthcare makes electronic monitors and testing strips used to measure blood sugar levels. Bayer did not admit or deny any wrongdoing in the case, and a spokeswoman said the company is "satisfied that the issues in question have been resolved."

Justice Department officials said Bayer paid Liberty Medical Supply Inc., one of the largest diabetic suppliers, about $2.5 million to convert patients to Bayer supplies between 1998 and 2002. The kickbacks, disguised as payments for advertising, were based on how many patients Liberty successfully converted to Bayer supplies.

Liberty Medical is known for its heavy-rotation television advertising, which features character actor Wilford Brimley. The Port St. Lucie, Fla.-based company did not return calls for comment Tuesday.

The Justice Department also alleged Bayer paid $375,000 in kickbacks to 10 other diabetes equipment companies. A government spokesman said the settlement does not include any penalties against the suppliers.

All 11 companies received government payments for providing equipment to patients enrolled in Medicare, the federal health care plan for seniors. The settlement resolves claims submitted to Medicare by the suppliers for Bayer products from 1998 through 2007.

"If medical device manufacturers want to serve Medicare beneficiaries they must follow the law," said Gregory Katsas, an assistance attorney general with the Justice Department. "Paying health care suppliers to place a particular brand of device with Medicare beneficiaries violates the law and will not be tolerated."

Under the settlement, Bayer agreed to a corporate integrity agreement which requires it to review and update its employee training programs for those who work with Medicare.

"For a period of years now we've already had programs in place to assure compliance," said Bayer spokeswoman Susan Yarin. "So these actions will be in addition to what we're doing already."

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Dozens of People Killed in Mumbai Attacks

Reuters

A reporter talks on her phone as smoke is seen coming from Taj Hotel in Mumbai.

At least 101 people were reported killed in blasts and gun attacks across south-central Mumbai late Wednesday evening, and gunmen were believed to have taken hostages in two of the area's most popular hotels for business travelers and tourists.

Police and gunmen were exchanging occasional gunfire at Taj Mahal and Oberoi hotels and an unknown number of people were held hostage, said A.N. Roy, a top police official. Officials said at least six militants had been killed since the overnight attacks began around 9:30 p.m. Pradeep Indulkar, a senior official at the Maharashtra state Home Ministry said 101 people were killed and 287 injured.

Later Thursday morning, police loudspeakers declared a curfew around Mumbai's landmark Taj Mahal hotel, and black-clad commandos ran into the building as fresh gunshots rang out from the area, apparently the beginning of an assault on gunmen who had taken hostages in the hotel. Ambulances were seen driving up to the entrance to the hotel and journalists were made to move even further back from the area.

A series of explosions had rocked the Taj Mahal just after midnight. Screams were heard and black smoke billowed from the century-old edifice on Mumbai's waterfront. Firefighters sprayed water at the blaze and plucked people from balconies with extension ladders. By dawn, the fire was still burning.

The attackers specifically targeted Britons and Americans at the hotels and restaurant, witnesses said.

An Indian media report said a previously unknown group calling itself the Deccan Mujahideen had claimed responsibility for the attacks in emails to several media outlets. There was no way to verify that claim.

The NDTV news channel showed several yellow and black rubber dinghies on a beach near the hotels, apparently used by the gunmen to reach the area.

Authorities believed seven to 15 foreigners were hostages at the Taj Mahal, said Anees Ahmed, a top state official. It was also unclear where the hostages were in the hotel, which is divided into an older wing, which was in flames, and a modern tower that was not on fire.

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European Pressphoto Agency

Locals gathered near the site of an explosion near the airport on Mumbai's Western Express Highway late Wednesday.

Indian Hotels Co. Thursday said it is monitoring the situation in and around its Taj Mahal Hotel. The company is cooperating with the police and the government "to ensure the safety and security of all our guests and staff," it said in a statement.

The fire broke out on the top floor of the Taj Mahal hotel, spreading along the side of the old part of the building. The lobby of the Oberoi was also reported to be in flames. Mr. Roy told NDTV television that at least seven incidents had taken place. He said police were treating those responsible as terrorists who had "opened fire indiscriminately."

Indian Home Affairs Minister Shivraj Patil said the attackers had kept explosives in vehicles and had been firing at people in the hotels.

Where the Attacks Took Place

Gunfire was reported at luxury hotels, a restaurant, police headquarters and a train station.

Shots were also fired at the Leopold restaurant, one of the most popular with foreign visitors to the city. Other incidents were reported at a cinema, a hospital and at the main train terminus in the area.

Mr. Roy said police continued to battle the gunmen. "The terrorists have used automatic weapons, and in some places grenades have been lobbed. The encounters are still going on and we are trying to overpower them," Mr. Roy said, according to the AP. India's army has been requested to be on stand by to help civilian authorities.

One guest at the Taj said the first incident began at about 9:45 p.m. local time when flashing lights and bangs were visible and audible outside the hotel. Taxi drivers, who wait in droves in front of the hotel, roared off. About 10:20 p.m., there were two loud explosions right outside the hotel, the guest said. "My instant reaction was, "It's a bomb,'" he said. A hotel representative later phoned, advising guests to remain in their rooms with the lights off and not to open the door until told by security that it was safe to do so. At 12:45 a.m. local time Thursday, another big blast was reported by a guest at the Taj.

In Washington, State Department spokesman Robert Wood said the U.S. is unaware of any American casualties at this point. "We strongly condemn the terrorist attacks" and stand ready to support India, he said.

Indian television reports said a little-known outfit called Deccan Mujahideen had sent a letter claiming responsibility for the attacks but the reports could not be confirmed and no other information was immediately available. The Deccan Plateau is a plateau that covers a large part of southern India, including Maharashtra.

The attacks come after a series of blasts attributed to Islamist terrorists over the summer and autumn in other cities around India, including the capital, New Delhi. National security already was expected to be a major electoral issue when the nation goes to the polls early next year; elections must be held before May. The Congress Party, which leads coalition governments at the national level and in Maharashtra state, home to Mumbai, is already facing pressure to do more to staunch terrorism.

The attacks will put further pressure on the battered Indian rupee at a time when foreign fund inflows have dried up amid the escalating global financial crisis. The benchmark Sensex index on the Bombay Stock Exchange, which is in the area where the attacks took place, has fallen more than 50% from its peak foreign funds pulled out.

The 105-year-old Taj hotel is one of India's most iconic buildings, commissioned by the Tata family to counter the British colonists' exclusionary "whites only" policy at what was then the city's best hotel, Watson's Hotel. The hotel has been expanded to include a modern tower next to the old hotel. The hotel is owned by Taj Hotels, part of India's leading conglomerate, Tata Group.

Consular Call Center

The State Department has established a Consular Call Center for Americans concerned about family or friends who may be visiting or living in Mumbai, India. The number is (888) 407-4747.

Opened in 1903, the Taj Mahal Hotel overlooks the Arabian Sea. The hotel has 565 rooms and is home to some of the city's most exclusive, expensive restaurants as well as the popular Insomnia nightclub. Many dignitaries and celebrities visiting India stay there.

Mumbai is a frequent target of attacks. In March 1993, 13 explosions resulted in 257 deaths and over 700 injuries. The blasts were orchestrated by an organized crime syndicate. In March, 2003, a bomb attack on a commuter train in Mumbai killed 11 people. In August of that year, twin car bombings in Mumbai killed at least 52 people and injured 150. Indian officials blamed a Pakistan-based terror outfit for the crime. In July 2006, seven bomb blasts occurred at various places on the Mumbai Suburban Railway, killing 200 people.

—Paul Beckett reported from New Delhi; Geeta Anand, Abhijit Basu and Subhadip Sircar reported from Mumbai. The Associated Press contributed to this report.

Write to Paul Beckett at paul.beckett@wsj.com

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Dad raped daughters for 27 years

(CNN) -- A British man was jailed Tuesday for raping two of his daughters and fathering nine children over 27 years, a case with echoes of Austria's Josef Fritzl.

The two daughters were made pregnant 19 times; there were nine births, five miscarriages and five terminations. Seven of the children are alive but suffer genetic deformities.

The father, who cannot be named for legal reasons banning the identification of his victims and the surviving children, pleaded guilty Tuesday at Sheffield Crown Court, northern England, and was sentenced to serve 25 life sentences to run concurrently.

The judge said the minimum term the 56-year-old rapist should serve in jail should be 19½ years.

South Yorkshire Police Chief Superintendent Simon Torr said, "The victims of these terrible crimes have asked me to state the following: 'His detention in prison brings us only the knowledge that he cannot physically touch us again. The suffering he has caused will continue for many years, and we must now concentrate our thoughts on finding the strength to rebuild our lives.' "

Speaking for the police, Torr added, "The main concern ... is for those who have been so badly affected: the victims who have suffered a terrible ordeal. We will continue to offer them our full support to try and help them get on with their lives.

"As far as the sentence goes, we are satisfied that this offender has received the strongest possible punishment for his heinous crimes. Now we need to ensure continuing support for those who have suffered as a result of his actions."

The daughters first told police about their ordeal in June, but the abuse dated to 1981.

It emerged that in 1998 one daughter rang Childline, a charity to help abused kids, and asked for assurances about being able to keep her children if she came forward. When Childline could not make that guarantee, the daughter did nothing more to raise her plight. Watch how the case came to light »

The UK's Press Association reported that the rapes began in 1981 with daily attacks and that for long periods, they would be raped up to three times a week, and the assaults would continue through pregnancies. Their only reprieve came after they had just given birth or when they were ill because of the abuse.

If either daughter tried to refuse their father's attacks, they would be punched, kicked and or held to the flames of a gas fire, burning their eyes and arms, PA reported.

Despite visiting hospitals and meeting with social workers over the 27 years of abuse, no investigation was launched into the family.

The case comes in the wake of the death of a baby, known only as Baby P, which has dominated headlines in Britain. The baby endured horrendous torture and died despite being on the local authority's child protection register.

In Austria this year, Josef Fritzl was arrested, accused of keeping his daughter in a basement dungeon and fathering seven children through the rapes.

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