Bailout Critic: Plan Could Cost $3 Trillion

Q: Does the government have enough money in $700 billion rescue plan to continue with both TARP and buying stakes in banks?

A: They don't. But they're a printing press -- they can do whatever the hell they want. Remember Ben Bernanke's helicopter speech? [He said] we have technology and it's called a printing press … and if we have to, we can drop money from the sky. ...There is no free lunch, you can run the printing press all day long, and you run into a dollar devaluation issue and a potential down the road inflation issue. But you know, you're choosing between less worse options.

With certain things, sometimes the choice is between two bad options and in this case, the bad options are do we let the whole system go to hell in a handbasket or do we cause a little dollar deflation and a little systemic inflation in order to genuinely avoid systemic risk?

Every past bailout we've seen, for the most of this past year, they've all cost more than originally thought. AIG is something like $135 billion already. That was supposed to be $85 billion. This [$700 billion package] is a start. My best guess is by the time we're done, it'll be between $2 trillion and $3 trillion.

Read more about Barry Ritzholtz's thoughts on how the government should resolve the financial crisis here.