Questions regarding the economic bailout

My past three post have been a little heavy on the data, easy on the fluff. That is because for some reason I am one of those people... yes the kind that hunts for information everywhere...we gather it, store it, organize it, and some of us even try to use it later on. Imagine that!


One of my favorite parts of the process is asking questions. Yes, I love to ask questions. People who know me will attest to it and people who don't know me will get to know this fairly quickly.

So here we go. Today I thought instead of giving you information I will ask questions and see what I get... (of course you do know chances are I will go look for those answers later on and blog about them in the future).


Let's talk about the economy and the bailout... So how is it working? No, no like the Dr. Phill question, I mean, what is the process they are following to decide where they are going to allocate the money? why? and when?

Last I heard, part of the sum is going to aid the ailing national automotive industry. I am not well versed in such industry's downturn, and I do understand some of the possible disastrous consequences that would come as a result of the car makers going under, but how is handing money to an ailing company (or two or three), going to prevent them from crashing? How are we solving the problem? or are we just putting it off for a later date at an expensive cost to our taxpayers?

Let's go back to the bailout for a moment, and to a different sector in distress; Mortgages, banks, homeowners. How is the money going to actually help the homeowner with a mortgage that just reset and is pulling them under? will a bank be given money in accordance of the number of homeowners they help? will the banks be required to renegotiate the rates and conditions of homeowners in trouble? What about people who have lost or will loose their job or whose income will take a substantial downturn as a result of this economic hard times making their monthly mortgage payments too large for them? How is the money given to the institutions going to be used, is the idea for it to somehow trickle down to the homeowner who is not making their monthly payments? how?

Right now what I have seen is that affordable loans are only "new" loans. This will benefit people who want to purchase a property, and yes, that will help in part because more properties will sell due to the fact that rates are historically low. It makes more sense to purchase a home instead of renting it. Let's think about this for a moment though... to get qualified for a loan, you have to be a solid candidate and actually be able to afford it. But the people benefiting from this new amazing low rates are people in healthy financial situations, and that is great, if it came hand in hand with a plan for the banks and financial institutions to work things out with current clients that already have a mortgage, even those that are not yet, but might soon be in default.

I do know that I have seen the number of foreclosures go down and that REO agents are getting less listings from the banks, but it is too soon to know if this is because the banks are actually negotiating with the homeowners in trouble or because of the change in procedure that requires the bank to give greater notice.

And one last question that keeps going around in my mind; Where is all this money coming from? Is the government printing more money? using money originally allocated for something else? going into greater foreign debt? what are the consequences this will have down the road?

I am not proposing we do nothing or not have a bailout altogether, I want to be clear of what is being done, how it will get done, what it will accomplish and what will be the price or consequence of the actions we are taking today.

One thing is clear for me, the pendulum has swung , this situation started when we all became to trusting, we trusted in the asset managers to know what they were buying and selling, we trusted in the company's CEO's CFO's and management to be honorable people working for the best interest of the company they represented, we trusted mortgages were being given to people who could afford them and that were told what it was that they were buying into with all this out of the box "creative" new products, we trusted. Now, it is hard to get that trust back. I can't trust that the same people who allowed this situation to advanced to the point that it did will actually get us out of it. Will they start looking after Country, Company and people's well being before their own, or are they still trying to advance their personal growth and financial gain? how can we trust when AIG gets a "helping hand" and the first thing they do is have a "relaxing" $400,000.00 dollar spa outing? how many people could they have helped with that Spa package?

Just wondering...

Any thoughts on any of this are welcome and encouraged.