What If The Bailout Does not Happen?

What If The Bailout Doesn’t Happen?

This week has been one to watch as the political rodeo on capital hill picked up more and more steam, from both sides, concerning the $700 billion dollar bailout. I watched with interest as I saw one side chastising the other for now having more oversight and other safeguards to protect the ‘taxpayer’. As I watched, I found it interesting that there were other ‘needed’ considerations that should be well thought-out for addition to this historic move.

Should there be payment relief for those homeowners who have just fallen on hard times. If they can’t make their payment perhaps this bill would provide for them to do so. And what about the ailing car industry, if there were a provision that would help those wanting to purchase a new automobile and there were provisions for that, would this not help that industry? And the wrangling seemed to go on and on from there.

Now I know that the financial industry is in shambles. One side of me says OK, the taxpayers didn’t put you in this mess, so why should the taxpayer now pay to get you out? I also know that if this situation is not fixed, and soon, we are on the edge of something none of us want to even think about.

Things like global financial collapse, not to mention the day to day things we all depend on in the financial world for our survival. Things like, when you swipe your credit card to buy groceries, gas or clothing, it may not work. When your employer can’t write paychecks, because the bank has frozen all accounts, announcing it is closing. There would be a run on all banks the likes of which this modern society has never seen, or imagined. When a bank closes, that means it is closed, that includes safety deposit boxes, too.

What would this bailout do to help prevent the above from happening? First of all, there are no guarantees this is the magic pill that will cure the problem. From all the symptoms though, it does seem to be the best option at this time. The idea is the $700 billion bailout would be used to purchase those tainted, upside down mortgages from the banks at reduced prices. The government would then keep the real estate, until the market gets better and then resell them on the open market for a profit. This is where we, the taxpayer, you and I are being told we will make a profit on this gigantic endeavor. Two years ago, was this not called ‘flipping’? I am getting up in age and my memory is not what is used to be.

Back to the solution, if the banks can unload these bad debts, they can start rebuilding their business and again start doing what banks are intended to do, loan money that keeps the economy flowing. Today banks have all but closed their doors to new loans. Small businesses and consumers are being turned away and banks are pulling back from loaning to one another. Now if the banks can reduce the amount of red ink on their balance sheets the theory is things will start getting back to normal. All of this sounds good, on the surface. I for one would like to see strict oversight of the plan, no golden parachutes for top executives, (I would hope some at the top would be replaced), I don’t believe we taxpayers should be paying for outrageous salaries or bonuses. This could be just what the doctor ordered to start turning around the Real Estate market, but only time will tell.

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