The Financial Bailout – The Good, The Bad, and The Ugly
Posted by: Jon in For Buyers, For Sellers, Market Watch, UpdatesWell, after a chaotic week on Wall Street, and in an attempt to avoid an economic depression, the federal government has now intervened to provide support for the economy and restore investor confidence by potentially risking hundreds of billions of taxpayer dollars. While allocating taxpayer money to support illiquid mortgage assets of questionable value is hardly ideal, it will likely prevent the failure of a major facet of the U.S. financial system.
The good news is that action by the Fed, the Treasury Department, and in coming days, Congress, should provide short-term stability in the face of what had been a rapidly accelerating financial crisis that was having impact around the globe.
The bad news is that these actions will obligate U.S. taxpayers to as much as $1 trillion dollars in future cost. Additionally, the situation is not likely to right itself in rapid fashion as the many years of loose lending cannot be repaired overnight.
The ugly news is that the federal government providing the “solution” is the same entity that has been asleep at the wheel while the massive government sponsored enterprises of Fannie Mae and Freddie Mac recklessly expanded their lending practices to the point of eventual failure. To make matters worse, they had plenty of private investment banks and lending institutions come along for the ride. Such a failure, the American people were assured, would never happen to Fannie and Freddie, yet somehow here we sit today. And as a result of all the bailout activity, the federal government will be the primary backer for the lion’s share of residential mortgages for the foreseeable future.
Only time will tell how this all shakes out……I just hope it does not get worse before it gets better.
FYI….Thanks to Hanley Wood (which can be found at at www.hwmarketintelligence.com ) for providing some content for this blog.
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September 25th, 2008 at 5:05 pm
Hi Jon,
I commend you for writing about this very grave topic, but I don’t knokw how you can be so calm. I am mad as heck -and that’s not what I mean -if you get my drift. I have just spent the last hour or so emailing all in congress with the following message:
Dear Senator ______________,
My family and EVERYONE I know is fundamentally opposed the the proposed bailout of $700 Billion-or whatever it will actually end up being. I cannot emphasize how much we feel let down by those in Washington and those “in bed” with those in Washington who let it get this far. There were many signs of this going bad, and the greed and deal-making clouded our government’s eyes from doing the “right” thing.
We are opposed to this additional bailout -as I have been opposed to all of them.
This is not a Republican thing or a Democratic thing as much as you self-important snobs like to believe -it is ALL of you!
Where does it stop and where are the safeguards for the TAXPAYERS???????????????????????
Where is the accountability???????????
Where is the investigation as to how it got this bad????
When are those responsible going to jail???????????????
And you wonder why so few citizens feel compelled to take part in our government any more – this is a prime example.
Let the chips fall where they may. It may create a well spring of new thinking and we certainly could use that.
SAME GOES FOR ENERGY SELF SUFFICIENCY! Get it done, quit talking about it and DO IT and make sure you PLEASE JUST DO WHAT IS RIGHT FOR OUR COUNTRY, not what feathers your own beds!
Don’t send me an automatic canned email response -we would all just appreciate it you would just do your job!!!!!!!!!!!!!!
Aloha from Hawaii
-anyone wishing to use this same message is urgently encouraged to do so.
Aloha, Mike Kerr
Mikie Likes It LLC
September 25th, 2008 at 9:58 pm
I understand your frustration……and encourage others to contact their government representatives to express their concern and deisre to not see our children’s future overburdened with debt.