Looking to Loan the Government Some Money for Free?
Dec 9, 2008
Posted by Jody Eisenman | Filed under crisis
The US government just completed its’ one month treasury auction today. They sold $20 billion worth at a rate of zero. That’s right. If you were fortunate enough to get any, you effectively loaned money to the good old USA for a zero return. Since there is some time value to money (i.e. a dollar today is worth more than a dollar a month from now), the effective rate is actually negative. By the way, the government received bids totaling four times that amount sold according to Bloomberg. Of course, one can get higher rates if you are willing to lend for longer periods. For example, three month treasuries are yielding the princely rate of .005%. That means if you put $100,000 into a three month treasury bill, you would receive approximately $125 in interest for the three months. It hardly seems worth it, but I guess it’s better than losing money.
The automakers continue to lobby Washington for some sort of bailout/bridge loan/handout. I believe that the reason this is going so slowly (as opposed to the bank bailout) is a combination of factors. The economy has gotten worse, foreclosures are increasing, public opinion is not very favorable and the first bailout doesn’t seem to have had much of an effect on the overall market. I do think that in the end, the government will agree to an assistance package but whether or not this will actually help rescue the industry temporarily or permanently is anyone’s guess.
