From CNN Money….. (H/T Naked Capitalism)

Among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac.

Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor’s recently placed an estimated price tag on this worst case scenario — $420 billion to $1.1 trillion of taxpayer’s money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980’s and early 1990’s. That cost taxpayers about $250 billion in today’s dollars.

That is just Standard & Poor’s worst case scenario of course. But even if you cut that figure in half we are talking about some serious money. And other people want cash as well. From CNBC…..

Lobbyists for the U.S. automakers—General Motors, Ford Motor and Chrysler—briefed White House officials, as well as U.S. Rep. John Dingell and other Michigan Democrats, on a possible bailout and plan to unveil the proposal after Labor Day, according to the report.

The plan is for the government to lend some $25 billion to the automakers in the first year at an interest rate of 4.5 percent, or about one-third what the companies are currently paying to borrow, the report said.

Under the proposal, the government would have the option of deferring any payment at all for up to five years, the article said.

Who can argue against this? Iraq gets reconstruction money. Banks get bailed out. Why not the Big Three? But somebody has to loan the money to the Federal Government so that it can do all this rescuing and saving the world type stuff. The Chinese are doing a great job of providing us with free money. Current 30 year treasury rates are 4.57. The Inflation rate has been running at over 5% the last couple of months. At those rates the Chinese are paying us to take their cash.

But their capacity to do this is not infinite.