In case you haven’t heard about it yet (since all news media sources are talking about it), the Bush administration proposed a $700 billion government bailout to buy bad mortgage debt and would be run directly by the Treasury Department. What the government purchases and what time it does would be by the government’s own [...]
In case you haven’t heard about it yet (since all news media sources are talking about it), the Bush administration proposed a $700 billion government bailout to buy bad mortgage debt and would be run directly by the Treasury Department. What the government purchases and what time it does would be by the government’s own discretion. After 2 years, the window for government purchases closes.
So what does this all mean? The $700 billion proposal, if implemented, would be the biggest government intervention on financial markets since the Great Depression. The problem, however, lies in that we won’t know the effects on American taxpayers of this $700 billion until later, since “this is money that is being used to purchase illiquid mortgage assets that are very difficult to value,” according to Paulson from NBC’s Meet the Press.
To get the bigger picture, $700 billion “would roughly be what the country has spent so far in direct costs on the Iraq war and more than the Pentagon’s total yearly budget appropriation. Divided across the population, it would amount to more than $2,000 for every man, woman and child in the United States” (NY Times).
Congress is currently debating on this bill. Democrats are calling for a proposal with more provisions to make sure that ordinary Americans will be helped, not more hurt, by this proposal. Meanwhile, President Bush is emphasizing the importance of passing the proposed bill (with very, very few provisions — the bill itself is only 3 pages long!) as quickly as possible, with Republicans also pushing a bill be passed soon.
Republican leader Mr. Boehner called for Democrats not to over-reach, warning that “[e]fforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors and small businesses deserve” (NY Times).
Again, I am no expert nor am I an economist, but a $700 billion “blank check” to the government is scary, to say the least. Let’s tell Congress to pass a proposal that will help our economy and ordinary Americans as well, by signing the petition!
If you’d like to read more in-depth articles about the crisis and the proposals, here are some links:
An overall Market Report of what’s going on in our economy: CNN Money Market Report
Article about the $700 billion proposal: $700 billion bailout: the latest
Lehman Brothers filed the largest bankruptcy in history of U.S.: The meltdown
New York Times in depth article about the proposal: Administration is seeking..
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