Here we go again. The fed has come out with a new bailout plan estimating 800 billion dollars to be pumped into the economy. This will hopefully 'jolt' the economy back into gear. But who exactly is getting the money?
Banks
The Fannie family &
"quot;non-bank financial institutions that provide consumer credit, such as credit cards and auto loans."
The reasoning behind this move is to help the credit crunch and encourage lending institutions to - well- to lend again. But just who are they going to be lending to? Credit worthy consumers and small businesses? Sure. But the problem is we have already established that there really aren't that many of the former to lend to, and with the economy the way it is are the latter willing to borrow more just to stay alive?
Experts are cautioning "Does Washington really want banks to go out and start making more problem loans just to have this same problem again in five years?" It seems that the governments solution to the credit crunch is to throw more debt at it. Will it help? In the short run, but what about down the road? Well by then it will be someone else's problem right?
Furthermore, the Fed now does not plan to buy troubled assets from institutions that would have allowed them to help troubled homeowners directly. I don't think the feds get that if people don't have the money to pay their existing debt, borrowing more money to pay what they owe now isn't a very good idea. In fact its ludicrous. Now is the time for consumers to pay existing debt before asking for more.
Finally, it is awesome how the institutions place blame square on the shoulders of consumers for this whole fiasco that THEY created. Statements such as "The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on sub-prime mortgages, loans provided to borrowers with weak credit histories."
They neglect to mention that the lenders were willing to make those loans and that they made a killing on them. In many instances the buyers did not know the full extent of what they were getting into with variable-interest loans. In fact most preferred a fixed rate loan. These were not offered them because of their credit histories. The clincher is that companies stood to make more once the initial interest period ended and interest ballooned on mortgages- in many cases doubling and tripling mortgage payments. People can afford to make payments on a loan under the original terms in which they were approved. It is wholly unfair to expect them to pay the exorbitant rates and payments the lenders put into place in order to exploit them.
For more on the topic visit:
http://money.cnn.com/2008/11/25/markets/thebuzz/index.htm?postversion=2008112512
Banks
The Fannie family &
"quot;non-bank financial institutions that provide consumer credit, such as credit cards and auto loans."
The reasoning behind this move is to help the credit crunch and encourage lending institutions to - well- to lend again. But just who are they going to be lending to? Credit worthy consumers and small businesses? Sure. But the problem is we have already established that there really aren't that many of the former to lend to, and with the economy the way it is are the latter willing to borrow more just to stay alive?
Experts are cautioning "Does Washington really want banks to go out and start making more problem loans just to have this same problem again in five years?" It seems that the governments solution to the credit crunch is to throw more debt at it. Will it help? In the short run, but what about down the road? Well by then it will be someone else's problem right?
Furthermore, the Fed now does not plan to buy troubled assets from institutions that would have allowed them to help troubled homeowners directly. I don't think the feds get that if people don't have the money to pay their existing debt, borrowing more money to pay what they owe now isn't a very good idea. In fact its ludicrous. Now is the time for consumers to pay existing debt before asking for more.
Finally, it is awesome how the institutions place blame square on the shoulders of consumers for this whole fiasco that THEY created. Statements such as "The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on sub-prime mortgages, loans provided to borrowers with weak credit histories."
They neglect to mention that the lenders were willing to make those loans and that they made a killing on them. In many instances the buyers did not know the full extent of what they were getting into with variable-interest loans. In fact most preferred a fixed rate loan. These were not offered them because of their credit histories. The clincher is that companies stood to make more once the initial interest period ended and interest ballooned on mortgages- in many cases doubling and tripling mortgage payments. People can afford to make payments on a loan under the original terms in which they were approved. It is wholly unfair to expect them to pay the exorbitant rates and payments the lenders put into place in order to exploit them.
For more on the topic visit:
http://money.cnn.com/2008/11/25/markets/thebuzz/index.htm?postversion=2008112512
- added November 25, 2008
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