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The Availability Of Funds

I bought my first house way back when Jimmy Carter was president. As I recall interest rates were around 20%, and so I came up with the bright idea of leaving the cash I needed for the down payment in an interest bearing account until the last possible minute. My plan, brilliant in theory if I do say so myself, was to stop by the bank on the way to settlement to get a cashier?s check for the down payment of around $20,000, which I would pay for by a cash advance on my credit card linked to the brokerage account that held the money.

I?d never gotten a cash advance on a credit card before (or done anything on that or any card amounting to $20,000), and to make sure this would work I went by the bank the day before the fateful day just to check. The bank officer I spoke with didn?t see any problem, but just to make sure he called to confirm that I had that much cash available in the account, explaining my plan for the next day. No problem, he was assured.

The next day, just before settlement, I went by the bank, and by now you?ve guessed: sure enough, problem. Big problem. Merrill Lynch, or its agent managing its VISA card transactions, would not authorize my cash advance!

After much frantic shouting into the phone and going through a supervisor or two, I finally managed to get an explanation. Apparently calls such as the one the bank officer had made the day before asking about the availability of funds automatically puts a hold on those funds in the amount of the inquiry that lasts for a certain amount of time. The fact that I was responsible for that call made no difference. Merrill Lynch or its agent wanted to be sure those funds were available to whomever had made the initial inquiry if a request for them came in later.

This story has a happy ending. I finally got someone in the bank or at Merrill Lynch who arranged to release the cash in time for me to get to the settlement almost on time, but it was a very close call.

Why, you ask, am I telling you this? Good question. I thought of this experience today when reading this story:

A series of bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23 trillion, the U.S. government?s watchdog over the effort says ? a staggering amount that is nearly double the nation?s entire economic output for a year.

If the feds end up spending that amount, it could be more than the federal government has spent on any single effort in American history.

For the government to be on the hook for the total amount, worst-case scenarios would have to come to pass in a variety of federal programs, which is unlikely, says Neil Barofsky, the special inspector general for the government?s financial bailout programs, in testimony prepared for delivery to the House oversight committee Tuesday.

.... ?The potential financial commitment the American taxpayers could be responsible for is of a size and scope that isn?t even imaginable,? said Rep. Darrell Issa (R-Calif.), the ranking member of the House Oversight Committee. ?If you spent a million dollars a day going back to the birth of Christ, that wouldn?t even come close to just one trillion dollars ? $23.7 trillion is a staggering figure.?

Let?s hope, I guess, that no Treasury officer or FDIC official has called to check on the availability of those funds, placing that $23 trillion (if it exists) in a lockbox.

Full post as published by Discriminations on July 21, 2009 (boomark / email).