I very much wanted to name this article "you sound stupid when talking about the economy", but decided to play it nice. I do not profess to know all of the intricacies of current plans for bailouts both for individual companies or for industries as a whole. However, I think that the overwhelming majority of Americans understand far little of what is going on with their tax dollars primarily because of the way the "bailouts" have been covered in the media. While I will not claim there has been any bias one way or another, misunderstanding has certainly been paramount. So, before you sound like an idiot talking to your friends (because one of them probably does know the truth), you might want to take a gander at this short list of facts.
Financial "Bailouts" Are Not Cash Giveaways The overwhelming majority of bailouts are one of two things - debt guarantees or low interest loan packages. The first item essentially is the United States acting as a cosigner on debts that are performing poorly at the moment. Think about the first class of folks who went under because they borrowed too much to buy too big of a house that was overpriced anyway. When those people defaulted on their loans, who do you think the mortgage companies went after to pay off those debts? If you are thinking "reasonable homeowners" then yes. In fact, it could easily be argued at this point that even the most conservative risk takers are being adversely affected. The government has decided to put an end to this cycle by stepping in and guaranteeing some of those loans. They are creating a stop-gap on all those questionable loans.
And what about low interest loan packages? Those are even better! We actually make interest on them. Right now, no one will lend anyone anything - which is why they call it a credit crunch. Sure, these aren't exactly the best times to be lending, but we aren't exactly giving money away to that bad cousin of yours who shows up on the holidays to whine about his rough financial situation. We are talking about companies that employ tens of thousands of Americans who, subsequently, are getting "bailed out" because they won't have to face a pink slip next month.
Subsequently, The Numbers Are Ridiculously Overinflated Currently numbers are being thrown around that the bailout is costing America trillions of dollars. In reality, these numbers reflect adding up all of those loans and all of those guarantees and assuming we will never recover a cent from them. That's like saying your credit card company gave you $5,000 when you got a credit line from them. Your credit card company didn't "bail you out" any more than we are "bailing them out".
If this bailout costs us trillions of dollars, we have bigger things to worry about - because that means that every business we have helped has gone completely under, hundreds of thousands if not millions have lost their jobs, and everyone is homeless.
Where is My Bailout? Good question. Aside from it being good. If you don't remember, we tried a real cash bailout last year - $600 for nearly every tax payer in America. That wasn't a "loan", it was a real bailout. What did you do with it? Where did it go? Did you use it to pay down your credit cards? Or did you go buy a brand new TV putting the rest of the cost onto your credit card. You got a bailout and, now, the government is trying to bailout the businesses which employ you, offer you core financial services, or in one way or another touch nearly every American from cradle to grave. Sorry, but I have little sympathy.
There is nothing wrong with opposing bailouts. Some people legitimately believe that it is a good idea to just let the whole thing collapse and rebuild itself - wholly laissez faire. Don't be stupid though and base your position on the incorrect assumption that we are just doling out cash left and right to big business for the fun of it.
Trevor is a Certified Financial Planner who provides services in Southern California. Article on mortgage bailout, financial bailout by Trevor Cox