Saturday, September 27, 2008

Comment: Bailout Smoke and Mirrors

The administration told people first that it had 24 hours to approve their $700 billion bailout package or the apocalypse would ensue.

Then it was by the end of the week to prevent absolute Armageddon. Now, supposedly lawmakers have until Sunday before Asian markets open on Monday to approve the whopper bailout or else...

Now this bailout, they claim, will calm things down and "save" the American, or even the world, financial system. But that's what they claimed when they sold earlier bailout claims for Bear and Stearns and AIG. Well, those bailouts did not appear to have much effect.

What is happening is that the same folk who got everyone into this mess are now the "experts" telling lawmakers they need to act and they need to act now! Obviously they neither know whether their plan will actually work or how soon it is needed to stop whatever gloomy consequences they are envisioning.

I have stated before that some type of plan will pass simply because the government has to at least look like it's trying to solve the situation.

So why not help those who really need help like the families struggling to pay their adjustable rate mortgages on their single dwelling homes? These families do not lose track of the number of homes they own unlike financial corporation executives, since they only own one -- the one they live in.

A grassroots relief plan has as much chance as solving the problem as any other. There are still tens of millions of mortgages that are expected to fail over the coming years regardless of any corporate bailout. These failures will drive down prices of surrounding homes in their neighborhoods creating much more of the same damage that is causing the current crisis.

These families faced with tough financial times tend to cut back on their spending and some even stash money away in shoeboxes for rainy days because they have lost trust in the system. There are so many ways that their financial decisions can impact the overall economy. Without assistance,for example, they may have to scrap plans to send their kids to college, which can have further repercussions on the workforce in the future.

Trying to mend things from the bottom up might not work either, but at least the government, in passing a sure-thing response to the crisis, is giving aid to those who really need it.

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