There’s no question that the pending bailout of Fannie Mae and Freddie Mac, the largest mortgage underwriters in the nation, will cost a lot. Very few people have given a price tag for this problem, but most analysts assume that it will be steep. What’s never talked about, however, is the fallout among other investment houses that has yet to be tabulated.

How should this problem be approached? Bennet Sedacca of Atlantic Advisors decided it was time to run the tab, and he started with a set of criteria to evaluate the houses that were weak. He calls them the “Dead Men Walking” because their finances are weakened on all fronts, specifically their problems are:

* Common stock too low to issue new shares.
* Preferred stock yield too high to issue new shares economically.
* Issuing debt is uneconomic.
* More write-offs coming in days to come.
* Business trends are awful.
* Denial.

How many places fit this description? A solid ten, including such big names as Wachovia and GMAC. They are the investment houses that will either have to be bailed out or go bankrupt – and there are too many of them to allow a wholesale failure without implications all along Wall Street.

This is the way he sees it going down: an initial bailout of Fannie and Freddie on the order of $100 billion, followed by a sense of entitlement among the other Dead Men Walking that will cost us $500 billion. Yes, all in all, he sees this as costing as much as the Iraq War.

That may sound like an awful lot of money that we don’t have, and it is. But if we don’t bail them out, the entire credit industry in the USofA could fail. So we will do it, however joylessly. That brings us to the next problem.

How will we raise upwards of $600 billion quickly? Keep in mind that the war, as an example, has been financed over a period of five years. We don’t have that long to bail everyone out, meaning that the Treasury will have to issue a lot of bonds very quickly to make this happen. Who will buy them? I don’t know. No one knows, because we haven’t faced this problem before. We’re already deeply in debt and previous bond sales have not exactly been easy.

This is an undiscovered country. We are going to find ourselves running ahead without a map or a compass, desperately trying to escape the horrors that lie at our back. Many people will ask why we don’t let them fail, but the truth is that we have a stark choice ahead – the collapse of credit as we know it or the collapse of the US Dollar that we depend on. I know what the choice will be, but it will not be a pretty one.

As the American Empire fades into history, this will probably mark the turning point. We can stave off a Depression but only at the expense of the way of life we’ve come to know. One way or another, things are going to look very expensive to us. That’s the cost of the bailout that lies ahead.