The cost of the bail-out will be massive

The cost of the bail-out will be massive as measured by the percent of GDP. The United States will be looking at close to 6% of GDP not including the Fannie and Freddie relief or the cost of the recent home owners bill which would total another $300 billion. This is also without the impact on potential GDP as the economy slows from its long-term growth of 3%.

On a relative basis, the cost of this bail-out will be cheap with the exception being Sweden which nationalized the banking system.If history is a guide, we can expect that the costs will keep rising. A $700 billion package may not be enough.