Do you understand what the proposed bail out is.. how it is designed to function and why it will help?

Question

if you would like to know my rant is next.. but honestly i just want to know how many people understand what it is SUPPOSED to be doing...

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the current economy problems are caused by a lowering of average home value in the United states for a large number of very complex reasons...

bottom line is banks are forced to maintain a certain amount of cash on hand compared ot the value of the loans they have outstanding.

as home loans go into default their cash value goes down without their loan value going down leaving them "under capitalized" ... this simply means at first they can't loan money until they restore the balance.. normally they do this by shifting a certain percentage of their loans to other lenders..

right now EVERYONE is credit tight.. so NO ONE can loan anyone money... as much as we would like to deny it.. we are a credit bsed country.. no one pays for services on delivery in the corporate world.. bill us and we pay when we get the bill.. if money can't be lent that can't be done.
so the lending business is slowly grinding to a halt.. and with it most of the US economy <which by the way if it stops will drag the world down with it>

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now comes the tricksy part.... what is the bailout doing?!?1 after all if we just loan the lenders cash.. they still are under-capitalized and can't loan money.. no good.... so what the "Bail out" will do is set up a government agency which will BUY from the lenders loans that are weighing down their portfolio <hopefully both good and bad>... reducing the debt load of those lenders and freeing money up so cash can flow again...

the US government will the be left NOT with a "Loan" to the banks.. but with a portfolio of good and bad mortgages which if properly managed will actually end up making money for the government.

do i expect that to happen... no... liberals in congress will have problems with the federal government foreclosing on people that signed up for stupid mortgages and will come up with some kind of a plan they can blame the other side to absolve a certain percentage of the debt.

the rest will be renegotiated into good debt and sold back onto the market in a few years.

understand the plan was complicated originally and is now 3 times the size due to add ins by congress.. but that is the BASICS of what it is doing...

so if you read this far.. were you aware before hand.. of what the bail out was going to do?

2008-09-28T23:28:51Z

in2alot

in answer to your question.. most of america's economy at the moment revolves around the construction industry.. it is the fuel for the fire.. people are getting nervous and not buying things because construction is in trouble.. construction is in trouble becuase builders can't take out loans to build new homes... so if we free up money so the builders can take out loans.. construction resumes <albeit at a slower pace> jobs are continued... and industry continues.

p2of9 · Accepted Answer

Good post!  One more thing though:  the corporations being bailed out are owned by regular people, in the form of stock.  Most people with 401(k) plans own stock--regular, blue collar people.  If the corporation goes under, the stock becomes valueless.  A lot of people would be out a LOT of money for retirement, their kids' college funds, and savings in general.

Me · Answer

I don't understand how this bail out is going to create more jobs (as Bush said in his speech the other night).  Yeah, sure the banks are going to be bailed out and they're going to get a fresh start and look good, but credit is tight right now and it's getting harder to get loans, people aren't spending money because they don't have enough to pay for the basic necessities, they're becoming more practical, things are too expensive, people still worry about jobs being lost, etc etc etc. With all the decline in spending, how it that going to create more jobs? I believe it will do the exact opposite... companies aren't going to keep employees or employ them full time when they're not getting business or showing a profit. 

Thank you for the explanation... I'm just very disheartened by the govt and financial analysts and corp execs who abused this system and now have to be reactive instead of proactive, at our expense. I still question what kind of economy we're going to be living in where everything is so expensive and most people will be living paycheck to paycheck.

? · Answer

My ideas are that it's unconstitutional on its face, seeing that of the truth that the Congress has no authority to take cash as taxes from humans to make use of for designated individual events. And definitely does no longer have the authority to mention that a court docket are not able to assessment it for constitutional or lawful functions. The Congress legislates and the Courts comes to a decision what's lawful beneath the Constitution, or so it's been. Any different results is to break our written Constitution. And sure I will word who votes for and in opposition to this kind of Act. Edit: The truly quandary in discussing this kind of act is---did the Congress have the Constitutional Authority to delegate its powers beneath Aricle a million segment 8 of the Constitution in 1913 with the Federal Reserve Act. If this had no longer occurred we might no longer be on this mess now.

Anonymous · Answer

Vote No Bailout! Demand that the bailout legislation be rejected. 28 Sep 2008 We are witnessing a bankers' coup

airlines charge for the seat. · Answer

Thanks for your post. I for one don't have any idea or clue what the bail out is about, how it works whether it is a good idea or bad one.
You make your explaination of what the bail out is about easy to understand. 
I'll learn more after your readers post their answers.
Again thanks for a great question/post.

Do you understand what the proposed bail out is.. how it is designed to function and why it will help?

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