Thursday, September 25, 2008

Please Help Me Understand This "Bailout" Stuff

Ok, so I am going to admit, I am confused about this bailout stuff. Click here for Bush's is easier for me to read it then listen to him read it.

I mean I get the general idea. The government wants to buy from certain firms their assets at the currently low prices and hold on to them until things are "back to normal" and in doing so spending up to $700 billion. Obviously they are proposing that this will help reduce a "long and painful recession" that we are facing. (Of course heaven forbid we used that "R" word even a few months ago.)

So I really don't fully understand the idea of this Bailout. Mind you I am asking questions and answering them with parts of the transcript from his speech last night. I am not stupid, I get the idea...I just still have questions, that were not addressed in the speech about how this is going to go down if it happens.

- So where are they getting this crazy amount of money - taxpayers of course. "It is difficult to pass a bill that commits so much of the taxpayers' hard-earned money." If they allocate up to $700 billion of our tax dollars for this what then happens to our other government expenses? The other places our tax dollars are SUPPOSE to go? Do those things get placed on a back burner? Do we have the money to also cover those pre-existing expenses? And will our money be going to pay the ridiculous salary of some CEO at one of these companies? What will happen to those of us who pay their loans and pay their mortgage and pay their taxes, but are still struggling to get by? (Am I selfish - no, Concerned - yes)

Is this considered a short-term solution? "In the short term, this will free up banks to resume the flow of credit to American families and businesses, and this will help our economy grow." Wouldn't that put us back where we are? I mean sure I want my credit back where it was, but does this also mean handing out more loans? That is what they are saying got us here in the first place.

Is this also a long-term solution? "The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back." How long before this happens. Months, a year, longer?? What is the plan in the meantime?

Will this be something that helps us at the moment but then in a few years we are going to be back in the same boat we are now? How are we going to prevent this from happening....a band-aid doesn't heal the wound. And are we helping just the companies or also the individuals who have fallen to foreclosures or other debt because of this?

I mean I unfortunately have credit card debt, and to me it sounds like we are covering up one debt by creating a new debt? Maybe I am way wrong, like I said I don't fully understand and stupid news shows are not helping at all.

So if you have a better idea of how this is suppose to work, I would appreciate it. I also don't want to come across as reluctant to pay or back this proposal, but I have questions and concerns about this. I also have concerns with the timing of this all. I mean, we can't go in the past but we have been talking about this possibility for some time now - I guess some just didn't want to hear it them.


  1. This whole thing is a bit shady, if you ask me (I know you didn't. But there's my opinion anyway). I too have questions in terms of the short- and long-term benefits versus costs. I should go talk to an economics professor at school to find out what he/she knows.

  2. while i don't normally like Glenn Beck, read this column:

    I don't really have any answers. I'm really worried that if the gov doesn't do this bailout/rescue, then we could really be headed toward another depression (or something very close to it) and I cannot even wrap my brain around that scenario.

    i would really like someone in power to explain HOW it is all going to work in terms that the average american can understand!

    i want to know when and how the $700B is going to be paid back and what the forecast is for the economy once this "rescue" is put in motion. are we going to be OK? oh and i also want reassurances that there will not be any more "golden parachutes" for the boneheaded Wall St CEOs who helped get us into this mess.

  3. Anonymous10:11 AM

    ok. so ...this is a long term solution. once these bad mortgage backed securities are off the sheets at these banks, they will once again return to lending to eachother and us. this (LIBOR) rate is very high right now, because there is no confidence that anyone will pay back a loan. once we get credit flowing banks will make loans to Americans for cars, houses, college, etc. We are not "bailing" people out. Executives will be fired of course. People that work at those firms will have jobs again. More importantly, this 700 billion we spend now we will make a profit. If we own these MBS then we can sell them at a higher price. Right now they cant be sold, but later they will be able to be sold for a good price. This plan overall:
    takes illiquid assets off the books
    restores credit lending at banks
    makes it so we can get money for cars, homes, vacation.
    we will make money. regulation is important tho, and that is what is happending in congress. but they need to do it fast before washington mutual fails and there is a bank run..this is the worst plan, except for all the other options

  4. Anonymous11:18 AM

    but what if the credit crisis has hurt your credit so bad that you can't get a loan anyway. how does this help that person. my dad can't even get help to pay for his heating this winter. how is the bill helping him????? i could care less about getting a loan right now, i just want to be able to pay my current bills.