So here I am browsing my favorite websites after a long day. I’m in my comfy pj’s, sipping on an ice cold lager. Done my workout, written a blog post, it is time for me to relax.

That is until I stumble upon (pun intended) a Digg.com story. For those that haven’t heard of it, Digg is a website that allows users to submit and vote on their favorite stories. When submitting a story, Digg users can create their own headline. No joking, I knocked my drink off the desk when reading the summary of this submission (linked again at the bottom of the page). Digg you owe me half a beer.

The Weakonomist has a big problem with misinformation in the media. Since the Bear Stearns party was started, this idea is floating around that taxpayers bailed out the investment bank. I’ve seen it in opinion columns, national newspapers, and of course the 24 hour news channels.

Now reader, I need your help to clarify a something. Read this statement and share it with the world.

THE FED IS NOT FUNDED WITH TAXPAYER DOLLARS. IF THE FED IS NOT FUNDED BY TAXPAYER DOLLARS, HOW DID THE BAILOUT COST ME MONEY IN TAXES?

They make their own money via fees and loans, just like a bank. The difference being the Fed gives any extra money to the treasury department. The Fed bailed out Bear Stearns using their own money.

For the bailout to cost you $100 as the Digg summary exclaims, the following must happen:

• All $29 billion in loans the Fed bought must go into default.

• The Fed must then make no money and therefore not provide extra funds to the treasury department.

• Treasury department must petition Congress and the President to raise taxes and make up for the loss.

• Congress and the President must approve said raise.

If every penny of Bear Stearns loans are written off and the treasury requests funds from Congress, what do you think they’ll say? Congress is already pissed at what the Fed did and is conducting their own investigation. They aren’t going to write them a check. Congress will tell the treasury department to tighten their belts and not rely on Fed kickbacks.

I know I don’t know everything, but PhD’s haven’t been able to explain how this could cost me money. If someone can please tell me I’m wrong and explain how I’m out $100, I’ll post your picture on this site and give you props. Else, read what Digg users thought was big news and really wasn’t.

Lack of financial education indeed.

By The Weakonomist

The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics.

categories: banking, economics, government, media