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Does The American Congress Understand the Bailout?

Although the comments are coming in at a 100 to 1 against the bailout, Congress failed to take into account that most people expected the bailout bill to pass. In that circumstance, you're basically going to see people against the bill be the most active. Activists are usually in the minority.

However, the bailout is not just for "greedy Wall Street" people. The bailout is for our economy. In the long run, we're still going to see a recession, we're still going to see job loss, we're still going to see higher energy bills. It's already that bad.

What the lack of a bailout means for you is this; with banks writing off bad mortgages, their balance sheets are going from plus territory to minus territory. Instead of mortgages being an asset, they've become a liability. This means bank assets are worth less, therefore they have less money to lend. They are not lending money to each other and they are not lending money to you unless your credit score is 720, and sometimes, not even then.

When banks have less money to lend, it means a drop in student loans, mortgages, short-term small business loans to float payrolls, shipping and purchasing, and the lessening of your ability to get a credit card, along with higher credit card interest rates.

Just some economic background -

We were in a recession in the mid 1970's. It took me six months to find a decent, but low paying job after I graduated, and I was repeatedly turned down for a credit card, after I was working. The pay was low enough that I couldn't afford to move into my own apartment for several years.

It wasn't until the 1990's that the economy recovered.

When my grandfather and grandmother died unexpectedly, I put the airfare on my credit card. When we decided to buy a home, the financial requirements were stringent, but we were able to afford it. Not the home we wanted, but the home we could afford. And at that time, our mortgage banker kept us honest as far as how much house we could buy. When we bought the first new car, either of us had ever had, we put half down and financed the rest.

When my company decided to expand, they took it public and raised a lot of capital in stock purchases. My boss became a millionaire and I got raises every year.

In the early 2000's, the raises dried up. My husband went through a period of unemployment. It took him five years to get back to the salary he had in 2000.

Today, I'm out of a job. So are a lot of people in finance. We have money in savings, which hopefully will not disappear over the next few months. Our retirement money market accounts are becoming garbage.

The stock market went down -777.68 and the market is at 10,365.45. It's the largest single point drop in history and is bigger than the drop that happened after 9/11. (Although percentage wise, it's only in the top 10 drops.) The S&P 500 has dropped 8¾%, which is more important, since a lot of 401K and Money Market funds are based on S&P averages, your retirement funds are in great jeopardy.

Our Congress is involved in partisan squabbling and will not resume until Thursday, after the religious holiday.

I'm a Capitalist. However, it not a religion, that I take on faith, it's a rational, pragmatic stand on making money. I always believed some things should be socialized. Healthcare, which is costing us an additional $400 dollars, because my husband is carrying me on his plan - how much is it costing you? Energy, to stop money from being transferred from our economy into the world market and to help create jobs at home. And there are some public work projects, for roads and bridge repair that should have been addressed ten years ago. You see, in addition to being a Capitalist, I'm also a taxpayer and a consumer.

Americans are the world's biggest consumers. When we stop spending money, the economy of the world goes down in flames. Banks around the world have bought our toxic mortgage assets, and today, three of the largest European banks had to be propped up by their governments. China has been quietly supporting their banks to avoid bank failure, but their manufacturing industries are losing money because we can no longer afford to buy their products.

I believe the final cost of the bailout is going to be closer to 2 trillion dollars, than it will be to 700 billion. The bailout will change how we operate as a country and it is an ugly, ugly bill, which by necessity, is very open-ended.

However, we stopped talking about a recession a while ago. We're going into depression territory now. Unlike economists, I'm not excited by the turmoil. I also never bought into the fear tactics the current President has regularly injected into his administration's governance. So, when I say, "I'm frightened," it's the first time during this administration that I've believed what they have had to say.

Call it a rescue plan, instead of a Wall Street bailout if you have to, but I think it's time to realize that "Chicken Little" really is surrounded by the wolves and that it's time to act.

September 29, 2008.

I love this article, what can I say? An economy built on money invested in money, a myth of reality.

Productivity increases wealth, I always thought it was simple and now look what's happening. I hope people don't mistake this current governmental socialist/communist/capitalist tri-breed for real, actual free market dynamics, because genuine capitalism would not have let us down so.

Hi TheSolution - We are not a true text book capitalist economy and haven't been since the Depression. And the markets will always go up and down. The problem is, we've walked away from being a manufacturing society to being an investment society.

Our stock market and banking industry are heavily regulated, but in the past 10 years have been heavily deregulated. This crash already happened on a mini-basis during the savings and loan crisis - the practice session for our current difficulties. Many people made money on this current crisis...but only if they were already super rich. Look at Warren Buffet picking up shares of companies at discount prices. Buffet is no one's fool. The market will recover.

It's the confidence in banks and the credit crunch driving the current problem. Banks have to have a 10% reserve and many people are moving money out of banks and under their mattresses or into T-Bills. Along with the bad mortgages, being acknowledged, many banks are falling close to their reserve number.

This means no loans. Which for many consumers isn't a bad thing, they abuse their credit. But for emergencies, like your car finally biting the dust or your refrigerator giving up the ghost, you won't be able to purchase these items with a loan or on credit.

1 in 5 car dealerships will fail in the next year. Small businesses won't be able to make their payroll. September's unemployment number was 150 thousand. Christmas, where retailers make the majority of their money for the year, is going to be a disaster and January will bring the highest unemployment numbers in 30 years.

According to some pragmatic economists, we won't recover from this for about 7 years.

You've raised some good points! What's really disturbing is how they came up with "$700 Billion". From what I understand, it was an estimate that qualified for the "right number" simply because it was big. Nice.

Hi TriTraining - It's true, they pulled $700 billion out of the ether. It should be simple enough to ask banks and investment companies to rate their mortgage packages and provide a number. Trust me, they know, that's why they're panicking.

I said it was an ugly bill. With all the time Congress has taken, they should have something practical together by now.

The way the Senate works, it had to stick this on a existing bill. They picked a pork barrel bill to satisfy a bunch a Senators. The pork would have passed anyway without our notice. When government spending goes online, I think people will be outraged at what they see.

Congressmen have a smaller constituent base to satisfy, who they hear from more often. When farmers realize the won't be able to buy Spring feed, watch the bill get passed.

What angers me is that one of the big sticking points is that congress doesn't want to limit CEO payouts.

I wonder how 700 billion (might as well be bazillion) might fare better had it been divided amongst taxpaying mortgagees.

Personally I trust the money in the hands of anyone other than a government that lacks accountability (that's pretty much all of them). Anyone but big brother except.........banks.

Hi again, TheSolution - You get what you pay for, or rather, what you vote for. Deregulation is at the heart of this. You'd think that everyone would have been screaming after the Savings and Loan scandal.

If we vote people in, and never follow up with an email or letter telling them what we want them to accomplish and they only hear agendas from lobbyists, they are going to get a skewed look at what is wanted from them.

Don't wait until we have a crisis. At least once a year, let your elected representatives know what you expect from them. The squeaky wheel really does get the grease.

You're absolutely right - Capitalism works when consumers i.e voters in this case, make their collective opinion validated through necessary means.

Hi - I wouldn't say Buffet is my hero, but 100 billion into Wall Street in the week where stocks tanked is a very smart move. He'll recoup that 10 fold in probably less than five years.

Beating up your Congressional representatives on a regular basis, just makes sense to me now, because I can see what the results are.

I'd like to see the US DOJ liquidate all the banks and give the money to taxpayers.

Hey SpamTrap - I feel your pain. Nationalize the banks, maybe. Close them, no.* Regulate them better and enforce the rules already on the books, definitely!

*Where would we keep and get our cash?

Congress is the cause of the debacle; I do not believe they understand how much damage they have caused to the credibiliy of USA securities. It has crossed my suspension that Mr. President stroked his "act" will against the very government that stroked an "act" will against his grandfather, Prescott Bush.

I have a theory about the cause of the current economic that's a little too radical to share in a reply. Is Prescott Bush the one with the factory in Germany that was manufacturing munitions during WWII? The one who sued the US Government for reparations because we bombed the factory? The one who WON the suit?

Money is something which exists only in our imaginations. We don't need it. If all money suddenly vanished, we'd still have the same resources. Corn would still grow, beef would still moo, water would still flow. All you've eliminated is the motivation for people to work for money. Intimidation and violence used to be the methods for controlling the common folk, making them work the King's land and paying taxes to the Royal Family... now the commoners are controlled by forcing them to pay money for basic necessities like food, clothing and shelter. 95% of us are working just to pay for a house and food and medical care so the other 5% of us can live like kings and queens.
Our economy is basically a civilized form of slavery. Money has replaced violence.

Hi SpamTrap - If you have a farmer that grows crops and corn, how would you get him to part with his products? While barter would work for a while, chances of his being overrun by the starving masses and burnt out, sooner or later, are very high.

We've played politics with food (North Korea for example, or pick a country in Africa that's been on the news recently,) for way too long for me to believe that money is the root of all evil or the solution to all ills.

The creation of the middle class, or a large group of people with money, eventually freed the peasants from bondage to the land.

If you don't want to pay for health care, email your Congressional representatives and Senators. Organize your friends to do the same. While I live in a relatively small town (8,500 people) we called the Mayor's office about garbage pickup and the Mayor called us back.

I never forgot how surprised I was that he'd take the time to do this...but it's what our elected officials are supposed to do. As long as you don't go "Travis Bickle" on them, they actually do respond to constituent pressure.

Vote, and elect officials who actually represent your concerns. Then make sure you tell them what they are. Go to their websites and read their policies. (If they have an agenda, it's usually visible from the start.)

P. "Bush was also on the board of at least one of the companies that formed part of a multinational network of front companies to allow Thyssen to move assets around the world." Thyssen backed Hitler fianancially in WWII.

Being that this the the first time in history U.S. economy goes down during an active military campaign sort of make one go Hmmmmmm in regard to Haliburton and VP Richard (Dick) Cheney.

Hi JazLive - Cheney and Haliburton (how convenient-he was able to make a nice little backroom deal for non competitive contracts in Iraq for his former company,) and the Bush family ties to the oil business, (can you say windfall profits?)

Follow the money trail and see who prospered.

I honestly don't understand why these two haven't been impeached.

There are local as well as Internationl support for impeachment. All the money they hijacked is not going to buy them out of the misery they have caused. Members of Congress should also be handed legal rits for many have learned lessons from Nixon's Administration; thus, should have called current Admin to the carpet!

1. Donald Trump actually said he didn't understand why Nancy Pelosi didn't have Bush impeached about lying about the Iraq war. This was in an interview last week, I believe on CNBC.

2. Someone on CNN has toted up the amounts we've spent on bail-outs (excuse me, the rescue plans) since 9/1/08. It's already 2.2 trillion dollars, which is over my estimate of 2 trillion.

3. The government accounting office has said we have 55 trillion dollars of debt not on the balance sheet. (A lose definition of Balance Sheet is a place where you put expenses and income which have not occurred, but you know are going to happen. For instance, when you depreciate the cost of equipment, such as computers over a three year period, you take them out of your expenses for the month that you paid for them and write them off over a 3 years.) So the government is actually in hock for 65 trillion, that they haven't listed anywhere.

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