The Stock Nerd

I know it’s a bit late to talk about it, but I feel it’s important to share my take on the bail out plan. So, why the anger? I mean, it’s sort of understandable because it puts our tax dollars on the line, BUT it must be kept in mind that WE, as Americans, helped get ourselves into this damn mess by living above our means.

I didn’t cause any of this, why am I being punished?!
You might say, “My family and I most certainly didn’t cause this mess because we’ve always payed our debts on time, why should I be punished?” This is a rather common complaint and if that’s what you’re thinking… trust me, my family and I completely feel you as we have ALWAYS paid everything on time in full amount. Fact is, if we’re going to get through this financial crisis, we must be united as a people. We must be willing to sacrifice for the good of our country as citizens/residents of the United States of America.

Financial companies are pointing fingers at the American people
Now, the Americans that are living above their means are part of the blame, but we can’t turn a blind eye to the companies who gambled by providing loans/credit with a high risk of default to these Americans. They have no right to point fingers at all. Simply put, the greed of the financial companies cannot be ignored.

Bailout plan or not, billions of dollars were going to be provided to companies anyways
The bailout plan just lays out a specific amount of money to provide to company, which gives investors/companies a certainty in government intervention when necessary to keep the company functioning. It’s just a security, which puts faith in the minds of the investors/companies. With or without the bailout plan, the government was going to hand out billions of dollars either way, as noted with AIG.

How is this bailout directly helping ME?
The idea of the bailout plan is to halt banks and other financial institutions from crashing to protect the consumer/people of America. Think about it, if we had a major bank crash like JP Morgan Chase Bank, a lot of American’s citizens money would be tied up and it would be a CRAZY, HUGE mess. This is more so important for the small banks than the larger banks (JP Morgan Chase & Bank of America come to mind) who will likely ride this crisis out and end up benefiting from it (since they’ve already both dissolved at least one large financial institutions thus far). The bailout will also help prevent a freeze in credit, which would be devastating for the economy (many businesses count on credit to run, including mine). For a normal consumer (non business owner)… think car loans, mortgages, credit cards, etc. Credit is a very important part of the economy for everyone. I think that the above paragraph provides the big picture regarding you (and everyone else) and credit, but if you need any more clarification, please let me know and i’ll create a seperate article getting into the specifics.

Are we going to end up paying everything we lend?
Definitely not. The idea is that if it works perfectly, it will all be paid back. Of course, we don’t live in a perfect world so there is definately a chance it might not work as intended. But chances are that the government will receive a large portion of the $700 billion back. This isn’t the first time the government has provided bail out money to large companies (think U.S. Savings and Loan Crisis of 1989).

I think this addresses most of the questions of the common people, definately leave comments so I know what to clarify or expand upon.

- The Stock Nerd

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