Another Day, Another $800B: 'Staggering Size' of Bailouts Necessary, Economist Says

• $600B to purchase mortgage-backed securities from government-sponsored enterprises Fannie Mae, Freddie Mac, Ginnie Mae, and the Federal Home Loan Banks.
• A $200B Term Asset-Backed Securities Loan Facility (TALF) aimed at shoring up the market for consumer-related asset-backed securities.

Joe Brusuelas, chief economist at Merk Investments, calls the latest action a "rather massive" step in the Fed's ongoing effort to unfreeze the credit markets

The actions are aimed specifically at improving markets tied to mortgages and consumer loans, respectively. But generally, Tuesday's announcement are an "attempt to assuage fear in the market in order to get lending moving again," Brusuelas explains.

Credit markets have improved in recent weeks — notably bank-to-bank lending rates — "but fear of counterparty risk has not receded," he continued; Tuesday's actions are geared to address that.

With this latest effort and Monday's $306 billion for Citigroup, the bailout tally now exceeds $8.5 trillion, including pledges for money market assets as the Fed dramatically expands its balance sheet and brings the "real" fed funds rate closer to zero than the official 1% level. (This is known as "quantitative easing," as discussed in the accompanying video.)

Americans' outrage at the staggering size of the bailouts is understandable. "But if there's no credit intermediation, there is no economy. Period, end of story," Brusuelas says. "They're doing what they have to do. In the long-term let's hope it works, because if it doesn't we're going to be in for a long, dark winter."

The economist believes the government action's are "moving in the right direction" but forecasts it won't be until late 2009 or early 2010 until these measures start to pay off — hopefully.