WOW! Seven-hundred billion dollars. Enough money to cover every square inch of the 102 floors of the Empire State Building with $100 bills, 280 times. Enough money to buy every person in America over the age of one a brand new iPhone G3, 5 times. Enough money to provide every single person in Africa with two meals a day for 140 days. Did America really make 700 billion dollars worth of mistakes?
To say that $700 billion is a lot of money is an understatement. It is probably more money than any one person will ever have during our lifetime, considering the fact that $700 billion is worth about 12 Bill Gateses. So what exactly happened?
First of all, the $700 billion is the amount of bad debt in our country that has accumulated and is currently clogging the financial markets. The bailout plan would give Washington broad authority to buy out all the bad debt from U. S. financial institutions for the next two years. This would allow our banks and other financial institutions to get out of the hole and start operating as normal again. This would in turn bolster our economy to get it back on track.
How is there $700 billion worth of bad debts?
This is somewhat of a touchy subject but it boils down to the fact that mortgage loans were given to people who could not afford them. Banks were so interested in loaning money that they did not care who they loaned to. Now that the economy is in such bad shape, the mortgage borrowers are beginning to realize that they cannot pay them back.
Which financial institutions would be eligible for help?
The proposed legislation does not make it clear as to which financial institutions would receive their share of the $700 billion, leaving open the question of whether hedge funds or pension funds could qualify.
Is the government just giving this away for free?
Not exactly. The proposal does not require that the government get anything in return, but it would allow the Treasury Department to declare these banks as agents of the government. This means that the banks must perform any reasonable duties that might entail. In fact, it is considered very unlikely that the U. S. government would get this money back.
Why has the bill not been passed yet?
For the same reason that most bills do not get passed through Congress, elected officials cannot agree. Generally Democrats support this bill more than Republicans but both parties have officials who oppose the bill. Many of these Congress members oppose the bill because of their constituents. With the election looming just over a month away, officials fear that if they do not support the constituent opinion, they will not be re-elected. It seems like everyone wants the bill to pass, they just do not want to vote for it themselves.
What does all of this mean for me?
It is hard to determine how all of this will affect the American consumer. But one sure thing is that it is incredibly difficult if not impossible to take out a loan right now. Banks are trying to maintain as much of their money as possible and lending is not an option in the fragile state of our economy. If you need to take out a loan or mortgage, you might just have to wait it out.
Nick Tart is the editor of four main sites for Worldwide Marketing Solutions. One of which is Home Income News. HomeIncomeNews.com is a one-stop resource to help you accomplish your personal, financial goals. If you enjoyed reading this article, please check out HomeIncomeNews.com .