Is The Ship Really Sinking?
>> Tuesday, September 30, 2008
Or does Congress just want us to think it is?
I heard quite a few interviews yesterday with politicians talking about the bailout- which has yet to pass. And thankfully so... I can not believe the stuff they are putting into this bill... Profits back to ACORN (which is under government sanctions for misusing taxpayer dollars)?!?! Are you kidding me?
The way I am understanding this (put quite simply) is that banks who invested heavily in high risk home loans are in trouble. Financial institutions that did not (CitiGroup and Wells Fargo to name a couple) are not in crisis.
I found this transcript of an interview with Senator DeMint from South Dakota. Apparently there is a lot of input from the American people on this subject- at 9 to 1 against a bailout.
One local news station interviewed two economics professors from ISU the other night. And though the tone of their speech indicated they were for a bailout they finished the interview by saying that "it might not work. We'll just have to wait and see."
I'm pretty sure the American people aren't wanting to just "wait and see" if spending such a huge amount of money might work. I'm pretty sure most of us are at the point where we are wondering why our elected officials spend money like they are playing Monopoly. And I think we're getting pretty sick of it.
I'm pretty sure this isn't passing because politicians want to keep their jobs. When it matters to them, personally, I guess they can remember who they work for...
UPDATE (Doug): More at Who caused “the biggest financial crisis since the Great Depression?”.
And, Understanding $700,000,000,000.
"The Bottom Line: If the Treasury simply took the $700 Billion and started paying off taxpayer mortgages, they could pay off every mortgage in the country worth less than $75,000... Or put another way, $700 Billion could pay off well over half of all outstanding first mortgages in the entire country."
2 comments:
Hi Jodi,
Isnt the sky always falling right before an election?
Not to say that our economy isnt in trouble--it is but a goverment bailout of this size isnt the answer.
I am no economist and have had to spend a great deal of time reading trying to understand all of this.
From what I read--financial institutions made reckless loans and because they are required by law to have the capital on hand in case these loans default they created away around the law in order to free up that capital.
They sold the bad "paper" IE loans to other financial institutions like AIG as an insurance.
On and on it goes--trouble is--there are to many of these loans and the companies do not have the capital.
This is a small picture of what I am learning--I still do not understand all of it.
I am glad the bill failed but they will pass something--I just hope its a bill that makes sense.
What the average American does not understand, is why this loan is needed and how the stock market works. The reason the market dropped a historical 778 points on Monday, was because the bill was not passed and consumer confidence in turn plummeted. When fear runs rampant, the stock market crashes and so does the economy.And not just our economy- but the global economy as well!
Also- other countries lose confidence in investing with us and we lose that cash flow as well.
The majority of banks and investors are embarrassed by what is going on today. The average American is angry about it- but that is not productive.
What we need to realize is, the stock market is based on trust. Extending credit is man's confidence in man. When the banks stop lending to one another, and the market freezes up, it hurts everyone. Small businesses can't get loans, people lose their jobs and in turn cannot pay their mortgage or their car payments.
Would you rather that happened?
If this bill is not passed, there will be zero confidence in any investment anywhere. Right now, people are so scared, they are pulling their money out of the market and investing it in T-Bonds
- on which the rate of return has dropped to 2%. The last time this ever happend? ... The Depression.
People are making a such a huge deal over 700 billion- On Monday the stock market (and the people investing in it) lost ONE TRILLION.
Which would have been least expensive? We need to restore consumer confidence and get the economy back on track.
Another thing the average American does not understand;
The government will most likely end up making money on this loan.
Not tomorrow, not next year, not in five years, but eventually, it will.
True, When this bill is passed, it is not going to work a miracle and the economy is not going to recover tomorrow or anytime soon. But that doesn't mean this is a bad decision.
The reason that the Great Depression occured, was because the government sat back and waited,
just hoping things would get better. Meanwhile (like today) fear ran rampant, everyone pulled their money out and the economy completely tanked.
The government does not want that to happen and neither do any of us.
Please stop being so angry about this and look at the big picture.
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