Nope, there are a few very large companies and when they go under they can take both the US economy and other nation's economies with them. A bailout will help stabilize financial markets allowing companies not affiliated with these failures to continue to have access to credit they need to do business. If these financial companies are allowed to take down the economy, a lot of companies that you wouldn't think of will go under. There will be a tightening on lending, including revolving credit, a tool that many companies use to pay for materials and personnel.

So a bailout will help stabilize, however it won't be a fix. These companies were betting on the fact that Americans would continue to spend more and more money on real estate and such. Sort of a keeping up with the Jone's effect. My neighbor bought a bigger house, why can't I? The rush caused artificial inflation in housing markets which drove up the prices of investments. Once the real estate boom died, homeowners and foreign investors were held holding the bag. The bad part is, the value of the product in the bag is not worth what is owed on it.

The real sad part is, we went through a smaller version of this during the tech boom 8 years ago. We didn't learn from that bust and we won't learn from this one. Yes the bailout in some form is needed. However until someone teaches consumers to be responsible, this will happen over and over again. But telling people to be fiscally responsible is hard on politics. It's much easier to sugar coat it.


Do you really believe that Obama's goals are attainable? I think that by him saying something like this you are begining to see a very long road back to politics as they always have been. It makes me believe that his speaking was more fluff than anything else. THink about the backing that Obama is getting from other politicians and how fast he has moved up to the premier Democratic spot. You don't get that far, that fast by rocking the boat.

The worst case: not a recession, but a depression. The problem is not if just one fails, but that one failure leads to another which leads to another. No one wants to lend money to anyone and the financial system and economy grinds to a halt.

http://www.bloggingstocks.com/2008/09/23/c...ty-of-the-plan/

There is no good plan. Bush doubled the deficit (remember, Cheney said deficits don't matter) much of which is held by foreign banks. Those banks are the ones who we have to ask to borrow even MORE to make the plan work. Either that, or the Fed starts printing money, the dollar falls, inflation jumps.

It is HOPED that modifications to the Bush plan (which they have been working on for months only came up with 2 pages and only now sprung it on Congress) will provide a steering mechanism to make sure mortgage debt is purchased at a fair price (not a hefty premium).

One proposal is that the Treasury will not be flushing $700 billion down the toilet. The will buy the mortgage bundles (50-80% of which are good) and resell them. Keep in mind, a foreclosed mortgage is still a physical house. Maybe the mortgage was for $500,000 and the house is now only worth $250,000, but that's still a $250,000 asset, not a $0 asset.

Banks are fighting measures to make it easier for people to keep their homes, which seems really dumb to me, especially if they are at least paying SOMETHING on it. Say there are 10,000 mortgages that normally would generate $1,000 per month. That's $10 million per month. With the economic problems, let's say 5,000 could still pay at least $500 per month. That's still $2.5 million per month. Yes, it is a 75% drop in revenue, but isn't that better than a 100% drop in revenue, especially if the house cannot be resold or can only be resold at $.40 on the dollar?

Banks are looking out for themselves. Lehman Brothers made $2.5 billion in bonuses for their top management a condition to their sale to the Barclays. But at least they seem to believe that there are things that can be saved.

Lee & Lanc city, thanks for the explanations. So the bailout, from what I read, is needed. Cann't the gov. say, hey if we are bailing you out you are not going to give anyone a bonus? A bonus is just obscene.

Some of the proposals do something about bonuses.

BTW, last year, the big 5 investment banks handed out $39 billion in bonuses while their companies lost $75 billion in stock value, and now this year, they need 20 times that to keep them running. And these same players are lobbying hard for no strings attached.

Everyone can say they are going to prevent the bonuses, but it comes down to how the executives contracts are written. If they hit the thresholds that guarnatee their bonus, they will get it per contract. If the governemnt tries and stops it, they will sue and get it anyway.

Just a guess, but I think you will see the bailout agreed to by both parties and bonuses that are owed will quietly be paid. Much of what you are seeing right now is just posturing by politicians due to the election.