Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson are set to testify to the federal government for their $700 billion bailout plan. They’re trying to sell the plan and get it approved so that our federal government will BUY all the bad loans that investors are forced to hold onto because they can’t get rid of them (no one is buying them, of course.)
There is no certainty that this proposal will pass on terms to the tune of $700 billion, but there’s certainly a lot of action going on right now.
If it does pass, then essentially we’ll start out with a clean slate on all these bad loans and mortgages and recreate liquidity in the market. Bernanke and Paulson are arguing that it will stimulate housing prices, will help people avoid foreclosure and will stunt job losses. Yes, we certainly need something to help us during these tumultuous times … but the question we need answered is what will this look like to us as taxpayers in the years to come? Can we really afford another $700 billion on the bill and to our deficit? All this after buying Fannie Mae, Freddie Mac and insurance giant AIG? Is it a democratic, capitalist government’s job to bail out its “kids” because those kids made poor choices and are now in trouble? Or is it a necessary action when those poor choices affect everyone else?
And what are the consequences to our economy, to our purchasing power, to *us* if the government doesn’t act?
I’m not going to answer those questions here, but it certainly has stirred a lot of conversation and dialogue – I’d love to hear your opinion. And I’ll keep you apprised of the details to the bailout as I know them.
