Bailout

I'm no expert but this is my basic understanding.

No bailout means that a large number of banks and financial institutions go out of business. This cause a lack of credit which is what many business depend on to do business and to grow. Without that credit business suffers which causes them to lay people off. Consumers start to spend less because they have less because business isn't spreading the money to employees. Without credit business don't spend money either.

All of these leads to a downturn in the economy but this a worse case example. Some or many of these causes may not have the thought effect. For example when Merrill Lynch was on the way out, Bank of America bought them out. That is the way the market should work. There is going to be some pain but stronger companies will pick up the slack. I think if there is no bailout the market will suffer strongly but will correct itself in a shorter period of time than what could possible happen with the bailout.

Approval of the Bailout means we add 700 billion in to the national debt. Add that to the 300 million buyout of Freddie May and Fannie Mac, the 75 million dollars to AGI and we've well on our way to plunging the dollar much further than it is now. A weaker dollar is in effect an increase in the cost of things. If things are more expensive, people buy less and put less into the economy which means lower profits for companies which puts them in a similar situation as above except there is available credit which I think just extends the problem. If this projection continues, the in 5 or 6 years or soon we have a weak economy and all the effects of banks crashing but with the addition of over an additional trillion dollars in deft. Thus, the recovery from a recession or depression will take much longer and much more severe overall.

In my opinion I'd rather take the sharper hit from some, not all financial institutions failing then the long drawn out that I'd fear would follow our dollar crashing. Either way, we in for a bumpy ride, it's a question of the lesser of two evils. I in no way think we're anywhere near the great depression levels. The basics of the economy and the American business of today are much different from the 1930's.

Like I said I'm not expert but this is my novice understanding of the situation.

 

What's scary are eventhough we learn from past experience and take precautions, the new/different situations of today will probably produce the same results as the past, blindside us.

 

That is because through all ages one thing remains constant: greed.

 

Wachovia is no more now. Interesting that the FDIC brokered the deal between Citi and Wachovia. Hmmmm

 

They had no choice. They couldn't cover Wachovia.

 

That is some fucked up shit.

 

Yet the FDIC is covering billions in WB debt. This deal wouldn't have been struck if the FDIC wasn't covering WB.

 

They're guaranteeing it with the idea that if this fails, the taxpayer will have to refund the FDIC accounts. That's my take on what I've read. Right now, the FDIC isn't paying anything out.

 

The deal would not of been done without the FDIC bailout. WB had about $8Billion on reserve for about $25Billion+ in bad debt. No bank would take that on without some guarantee. A guarantee is basically paying it out. IMHO, WB may have lasted less than a week without this takeover.

 

Right, a guarantee. The FDIC did not pay a single cent on this merger according to news articles.

http://blogs.wsj.com/economics/2008...hovias-banking-operations/?mod=googlenews_wsj